File No. 70-8001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
______________________________________
POST-EFFECTIVE AMENDMENT NO. 2
TO
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
______________________________________
Arkansas Power & Light Company Louisiana Power & Light Company
425 West Capitol Avenue 639 Loyola Avenue
Little Rock, Arkansas 72201 New Orleans, Louisiana 70113
Mississippi Power & Light Company New Orleans Public Service Inc.
308 East Pearl Street 639 Loyola Avenue
Jackson, Mississippi 39201 New Orleans, Louisiana 70113
System Fuels, Inc.
639 Loyola Avenue
New Orleans, Louisiana 70113
(Names of companies filing this statement and
addresses of principal executive offices)
______________________________________
Entergy Corporation
(Name of top registered holding company parent
of each applicant or declarant)
______________________________________
Gerald D. McInvale
Senior Vice President and
Chief Financial Officer
Arkansas Power & Light Company
425 West Capitol Avenue
Little Rock, Arkansas 72201
(Names and addresses of agents for service)
_____________________________________________
The Commission is also requested to send copies of any
communications in connection with this matter to:
Laurence M. Hamric, Esq. Thomas J. Igoe, Jr., Esq.
Denise C. Redmann, Esq Reid & Priest LLP
Entergy Services, Inc. 40 West 57th Street
639 Loyola Avenue New York, New York 10019
New Orleans, Louisiana 70113
<PAGE>
Item 1. Description of Proposed Transactions.
Item 1 of the Application-Declaration, as heretofore
amended, is hereby supplemented to include the following at the end of
such Item:
"Arkansas Power & Light Company ("AP&L") is proposing to
replace its existing steel railcar fleet with aluminum railcars. The
steel railcars are currently being used by AP&L to transport coal from
Wyoming to the two-unit White Bluff Steam Electric Station located
near Redfield, Arkansas ("White Bluff") and the two-unit Independence
Steam Electric Station located near Newark, Arkansas ("ISES"). By
replacing the steel railcars with aluminum railcars, AP&L and its
wholesale formula rate and retail customers, as well as the other
co-owners of the stations, will realize substantial reductions in fuel
costs. As more fully discussed below, the cost savings would be
significantly greater if AP&L were permitted to (a) sublease its existing
steel railcars for up to the remainder of their respective lease terms,
and (b) sublease the new aluminum railcars during periods when they are
not needed to service the coal transportation requirements of White Bluff
and ISES. AP&L is seeking authority herein to enter into such subleasing
transactions.
Background.
By orders dated November 1, 1979, August 25, 1980, June 15,
1982 and May 15, 1984 (HCAR Nos. 21277, 21689, 22556 and 23309), the
Commission authorized System Fuels, Inc. ("System Fuels"), the fuel-
supply subsidiary of the Entergy System, to acquire by leveraged
lease, in four separate transactions, 2,250 100-ton rotary dump steel
railcars<FN1>. Pursuant to the Commission's orders dated July 7, 1992
(HCAR No. 35-25576) and September 3, 1992 (HCAR No. 35-25618) in this
File, AP&L, a principal owner<FN2> and the contractual operator of White
Bluff and ISES, assumed System Fuels' rights and obligations as lessee
under the leases, effective April 30, 1993.
In addition to authorizing the assumption by AP&L of the
leases, the Commission's July 7 and September 3, 1992 orders placed
various restrictions on AP&L's ability to sublease the steel railcars
to third-parties. Among those restrictions were the requirement that
(a) no sublease be longer than the lesser of one year or the period
during which the railcars are not needed for the transportation of
coal to White Bluff and ISES, and (b) no more than 50% of the railcars
be subleased at any one time.
Transportation of coal from Wyoming to White Bluff and ISES
is provided by Union Pacific Railroad and Western Railroad Properties,
Inc. (the "Railroads"). Pursuant to a rail transportation agreement
with the Railroads, AP&L provides the Railroads with the railcars
needed to transport the coal and pays the Railroads freight charges
for the coal which is transported. As a result of recent
negotiations, the Railroads have agreed to significantly reduce their
freight charges provided that AP&L replace its existing fleet of steel
railcars with aluminum railcars.
_______________________________
<FN1> During the past 14 years, 25 of the original steel railcars were
destroyed in derailments leaving 2,225 railcars currently in
service.
<FN2> AP&L's ownership interest consists of 57 percent of White Bluff
and 31.5 percent of ISES Unit 1.
<PAGE>
The use of aluminum railcars has become standard in the
industry. By using aluminum railcars, the number of trips needed to
deliver the same quantity of coal can be reduced because an aluminum
railcar can carry approximately 120 tons of coal while the maximum
load for a steel railcar is 106 tons. By reducing the number of train
trips, the Railroads are able to significantly reduce their variable
costs by making extra crew shifts and power available for new
business. A portion of these savings would be passed on to AP&L
through reduced freight rates.
In order to evaluate the economic attractiveness of
replacing the steel railcars with aluminum railcars, AP&L developed a
Base Case and an Aluminum Case. The Base Case represents the costs
associated with the continued use of the existing steel railcars until
the expiration of their respective lease terms. In order to meet the
projected combined coal requirements for White Bluff and ISES, the
Base Case assumes the acquisition of an additional 345 aluminum
railcars in 1996 and, because of the greater hauling capacity of
aluminum railcars, the acquisition of 1,944 aluminum railcars to
replace the 2,225 steel railcars upon expiration of the existing
leases.
The Aluminum Case represents the costs associated with the
full replacement in 1995 of the steel railcar fleet with aluminum
railcars. As the aluminum railcars are delivered, the Aluminum Case
assumes that the existing steel railcars are either parked, subleased
or sold.
Both the Base Case and the Aluminum Case are based on
forecasted annual deliveries of 13.5 million tons of coal and both
include the costs associated with lease payments, maintenance
requirements and freight charges for the steel and/or the aluminum
railcars.
If AP&L were to park the entire steel railcar fleet and
continue to make rental payments in connection therewith, the cost
savings associated with the full replacement of steel railcars with
aluminum railcars in 1995 are projected to be, on a net present value
basis, $44.0 million for the initial ten years of the project (1995-
2004), and $95.1 million for the period 1995 through 2035, the year in
which the last coal unit is expected to be retired. The portion of
these savings attributable to AP&L retail customers is estimated to be
$5 million for the initial ten years of the project and a total of
$22.0 million over the project life.
The results of an economic evaluation and analysis
documenting these savings projections are included in a report
entitled "The Economic Analysis of Replacing the Steel Gondola Fleet
with Aluminum Prior to Lease Termination" annexed to the direct
testimony of Jeffrey G. Herndon before the Arkansas Public Service
Commission ("APSC") (see Exhibit D-3 hereto).<FN3>
_______________________________
<FN3> The Economic Analysis contains information which is subject to a
confidentiality provision in AP&L's rail transportation agreement
with the Railroads. In order to comply with the confidentiality
provision, a redacted version of the Economic Analysis was filed
with the APSC and is filed herewith. An unredacted version of
the Economic Analysis was filed with the APSC Secretary's office,
subject to a protective order.
<PAGE>
Subleasing of Existing Steel Railcars.
As discussed above, the replacement of steel railcars with
aluminum railcars in 1995 is projected to result in substantial cost
savings even if AP&L were to park the entire steel railcar fleet and
continue to make rental payments in connection therewith.<FN4> The cost
savings would be significantly greater, however, if AP&L were able to
offset a portion of the parking charges and rental costs by subleasing
the railcars for the remainder of their lease terms<FN5> or terminating
the railcar leases and realizing any benefits from the sale of the
railcars by the lessors.
On February 22, 1995, the APSC issued an order permitting
AP&L to recover both the costs associated with the proposed aluminum
railcar lease as well as the costs associated with the existing steel
railcar leases (offset by the proceeds of any sublease or termination
and sale). The APSC order provides that such costs are properly
accounted for in the Uniform System of Accounts as fuel costs in
Account 151 - Fuel Stock for all purposes under AP&L's retail fuel
adjustment clause. Thus, any revenue received by AP&L from the
sublease or sale of the steel railcars would reduce the fuel costs
which are passed through to AP&L's retail customers on a current basis
pursuant to the fuel adjustment clause. A copy of AP&L's application
to the APSC, as well as the APSC order approving the application, are
filed as Exhibits D-1 through D-5 hereto.
_______________________________
<FN4> Parking charges for the entire steel railcar fleet are projected
to be $1,015,156 per year. Lease payments under the steel
railcar leases total approximately $8.6 million per year.
<FN5> The base terms of the existing steel railcar leases will expire
over the next three to seven years (July 1, 1998, January 1,
1999, September 1, 2000 and September 1, 2002).
<PAGE>
In addition, AP&L intends to file an application with the
Federal Energy Regulatory Commission ("FERC") requesting confirmation
that both the costs associated with the proposed aluminum railcar
lease as well as the existing steel railcar leases are properly
accounted for as fuel costs in Account 151 - Fuel Stock for purposes
of AP&L's wholesale fuel adjustment clause. Therefore, upon FERC
confirmation of such accounting treatment, any revenue received from
the sublease or termination and sale of the steel railcars would also
reduce the fuel costs which are passed through to AP&L's wholesale
customers.
Due to the current strength of the steel railcar leasing
market, AP&L believes that subleasing of the steel railcars would
result in greater revenues and therefore increased cost savings than
would termination of the leases. Moreover, termination of the leases
could trigger significant payment obligations to the lessors in 1995
if the proceeds received from the sale of the steel railcars were less
than the termination values provided for in the leases. If, on the
other hand, AP&L were to sublease the steel railcars, any sublease
revenue received by AP&L would directly offset AP&L's total lease
obligations.
AP&L believes that subleasing of the steel railcars would
provide a stream of income which would significantly offset the
ongoing lease costs. If AP&L received sufficient sublease income to
offset 50 percent of the steel railcar lease payments, the net present
value of project savings would increase to $61.0 million in the first
ten years and $112.1 million for the total project life, measured in
1995 dollars for all ownership interests. If sublease income is
sufficient to offset 100 percent of the steel railcar lease payments,
the net present value savings increase to $74.5 million in the first
ten years and $125.6 million for the project life for all ownership
interests. See Exhibit D-3 hereto.
In order to lock-in the favorable freight rates offered by
the Railroads, AP&L has negotiated a priority in the waiting line for
the manufacture of the aluminum railcars. Any delay in placing a
final order with the manufacturer could jeopardize the ability of AP&L
and its ratepayers to realize the projected cost savings.
Additionally, although the market for subleasing of steel railcars is
currently very strong, if AP&L does not move expeditiously in
arranging for the sublease of its existing steel railcars, sublease
rates may decline substantially as other utilities convert to the use
of aluminum railcars and flood the sublease market with their existing
steel railcars.
AP&L's steel railcar leases generally provide that AP&L may
not, without the prior written consent of the transaction
participants, sublease the railcars for a term that exceeds one year
or extends beyond certain specified dates. AP&L is currently seeking
from the lessors, and expects to receive shortly, the necessary
consents to sublease the steel railcars for their remaining lease
terms.
Because the existing steel railcars will become economically
obsolete upon acquisition of the new aluminum railcars, and in view of
the significant fuel cost reductions that would result from
subleasing, AP&L hereby requests authority to sublease all of its
existing steel railcars for up to the remainder of their respective
lease terms so long as the following conditions are met:
A. Each subleasing transaction shall be reported by a quarterly
Rule 24 Certificate.
B. Any revenue realized from the sublease of the railcars shall
be credited against AP&L's costs as lessee of the railcars.
The benefit from such lower cost of leasing the railcars
shall accrue to the owners of White Bluff and ISES on a pass-
through basis. Such revenues shall be reflected accordingly
in AP&L's ratemaking provisions, except to the extent the
regulatory authority having jurisdiction over the matters
authorizes a different treatment. Such revenues will be
credited to "Fuel stock" (Account No. 151 under
FERC's Uniform System of Accounts). In the event AP&L
changes its method of accounting for subleasing it will
provide 30 days advance notice of the proposed change to the
SEC.
Subleasing of Newly Acquired Aluminum Railcars.
In order to satisfy the combined annual coal requirements
for White Bluff and ISES, AP&L will need to place in service 2,289
aluminum railcars. The size of the aluminum railcar fleet has been
determined based upon the average cycle time to deliver volume
requirements to White Bluff and ISES, taking into account five percent
spare railcars and one maintenance train. See Exhibit D-3 hereto.
During peak hauling periods the entire aluminum railcar
fleet will be fully utilized. However, due to changes in coal burning
forecasts, fuel prices, adjustments to the Entergy System's economic
dispatch, emergency plant outages, coal supply or railroad delivery
force majeure and other causes, there may be times when fewer than
2,289 railcars will be required to service White Bluff and ISES.
During these periods, subleasing of the aluminum railcars would
provide a stream of income which would offset AP&L's rental payment
obligations under the proposed aluminum railcar leases. In accordance
with the accounting treatment described above, any reduction in AP&L's
rental obligations would benefit AP&L and its wholesale and retail
customers through reduced fuel expenses.
The imposition of artificial restrictions as to the number
of railcars which may be subleased or the maximum term of any sublease
would only serve to thwart AP&L's efforts to minimize fuel costs which
are passed through to its wholesale and retail customers. Moreover,
the imposition of such restrictions would be inconsistent with the
Commission's recent decisions in The Southern Company<FN6> and Eastern
Utilities Associates.<FN7>
_______________________________
<FN6> HCAR No. 35-26211 (December 30, 1994) (Memorandum Opinion and
Order Authorizing Acquisition of Nonutility Subsidiary and
Related Transactions; Reservation of Jurisdiction; and Denying
Request for Hearing).
<FN7> HCAR No. 35-26232 (February 15, 1995) (Memorandum Opinion and
Order Amending Prior Orders to Remove 50% Limitation Upon
Activities of Energy Management Subsidiary).
<PAGE>
In The Southern Company, the Commission permitted Southern
Communications Services, Inc., a newly-formed subsidiary of The
Southern Company ("Southern Communications"), to provide up to 80% of
the capacity of its proposed wireless digital communication system to
nonassociate companies. Because the system would at all times remain
available for use by The Southern Company's operating subsidiaries,
the Commission determined that the use of the system by nonassociate
companies would not interfere with the use of such system by the
operating companies. The Commission further determined that by
providing such services to nonassociate companies, Southern
Communications could recover the cost of the system, in part, from
nonassociate companies, thereby reducing the costs borne by associate
companies.
In Eastern Utilities Associates, the Commission removed the
50% limitation it had previously imposed on EUA Cogenex Corporation
("Cogenex"), a wholly-owned subsidiary of Eastern Utilities Associates
("EUA"). In approving the acquisition of Cogenex in 1986, the
Commission had permitted Cogenex to provide energy management services
outside of New England provided that the revenues attributable to
customers outside of New England would remain less than revenues
attributable to customers within New England. The Commission removed
the 50% limitation after determining that the provision of energy
management services was closely related to EUA's core utility business
and that the expansion of such services would not divert management
time and attention from EUA's core utility operations. The Commission
also noted that the services provided by Cogenex have resulted in
significant benefits to EUA system consumers.
The rationale in The Southern Company and Eastern Utilities
Associates is equally compelling in the present case. The aluminum
railcar fleet will at all times be principally dedicated to the needs
of White Bluff and ISES. By subleasing the railcars only during
periods of non-utilization by AP&L, the sublease transactions will in
no way interfere with the transportation requirements of White Bluff
and ISES. Moreover, AP&L's wholesale and retail customers will
directly benefit from the sublease transactions through reduced fuel
costs.
Further support for AP&L's proposed subleasing arrangements
may be found in a number of the Commission's "excess capacity" cases
in which utilities have been permitted to sell their excess capacity
from nonutility businesses to non-affiliates without regard to any
artificial restrictions as to the amount or nature of such sales.<FN8>
_______________________________
<FN8> See Jersey Central Power & Light Co., 37 S.E.C. Docket 1243
(March 18, 1987) (licensing of computer programs); Indiana and
Michigan Electric Co., et. al., 35 S.E.C. Docket 252 (March 4,
1986) (provision of river transportation services); Consolidated
Gas Transmission Corp., et. al., 34 S.E.C. Docket 990 (November
20, 1985) (leasing of microwave radio facilities); National Fuel
Gas Co., 29 S.E.C. Docket 448 (November 29, 1983) (sale of
natural gas production); Ohio Power Co., 28 S.E.C. Docket 242
(June 17, 1983) (provision of coal transloading services); New
England Electric System, 24 S.E.C. Docket 229 (December 9, 1981)
(subchartering of coal collier).
<PAGE>
In view of the foregoing, AP&L hereby requests authority to
sublease its aluminum railcars to third parties subject to the
following restrictions:
A. No sublease will be longer than the period during which the
railcars are not needed for the transportation of coal to
White Bluff and ISES.
B. Each subleasing transaction shall be reported by a quarterly
Rule 24 Certificate.
C. Any revenue realized from the sublease of the railcars shall
be credited against AP&L's costs as lessee of the railcars.
The benefit from such lower cost of leasing the railcars
shall accrue to the owners of White Bluff and ISES on a pass-
through basis. Such revenues shall be reflected accordingly
in AP&L's ratemaking provisions, except to the extent the
regulatory authority having jurisdiction over the matters
authorizes a different treatment. Such revenues will be
credited to "Fuel stock" (Account No. 151 under
FERC's Uniform System of Accounts). In the event AP&L
changes its method of accounting for subleasing it will
provide 30 days advance notice of the proposed change to the
SEC."
Item 2. Fees, Commissions and Expenses.
Item 2 of the Application-Declaration, as heretofore
amended, is hereby supplemented to include the following at the end of
such Item:
"Expenses to be incurred by AP&L in connection with the
subleasing transactions proposed herein are estimated not to exceed
$97,000, including $30,000 estimated for legal fees, $65,000 estimated
for the fees of Entergy Services, Inc. and the $2,000 filing fee
payable to the Commission with respect to this Post-Effective
Amendment No. 2 to the Application-Declaration."
Item 3. Applicable Statutory Provisions.
Item 3 of the Application-Declaration, as heretofore
amended, is hereby supplemented to include the following at the end of
such Item:
"AP&L believes that the proposed sublease of the steel and
aluminum railcars to third parties as described herein may be subject
to Sections 9(a) and 10 of Act."
Item 4. Regulatory Approval.
Item 4 of the Application-Declaration, as heretofore
amended, is hereby supplemented to include the following at the end of
such Item:
"No state regulatory body or agency and no federal
commission or agency other than this Commission has jurisdiction over
the sublease transactions proposed herein. As discussed above, by
order dated February 22, 1995 the APSC has permitted AP&L to recover
both the costs associated with the proposed aluminum railcar lease as
well as the costs associated with the existing steel railcar leases
(offset by the proceeds of any sublease or sale). The APSC order
provides that such costs are properly accounted for in the Uniform
System of Accounts as fuel costs in Account 151-Fuel Stock for all
purposes under AP&L's retail fuel adjustment clause. In addition,
AP&L intends to file an application with the FERC requesting confirmation
that the costs associated with both the proposed aluminum railcar
lease as well as the existing steel railcar leases are properly
accounted for as fuel costs in Account 151 - Fuel Stock for purposes
of AP&L's wholesale fuel adjustment clause."
Item 5. Procedure.
Item 5 of the Application-Declaration, as heretofore
amended, is hereby supplemented to include the following at the end of
such Item:
"AP&L respectfully requests that the Commission enter a
supplemental order authorizing the subleasing transactions proposed
herein as soon as practicable, but in no event later than May 15,
1995. AP&L hereby waives a recommended decision by a hearing officer
or any other responsible officer of the Commission, agrees that the
Staff of the Division of Investment Management may assist in the
preparation of the Commission's supplemental order, and requests that
there be no waiting period between the issuance of the Commission's
supplemental order and the date it is to become effective."
Item 6. Exhibits and Financial Statements.
a. Exhibits
D-1 Application to the APSC (Docket No. 94-439-U)
D-2 Direct testimony of Roy A. Giangrosso before the APSC
D-3 Direct testimony of Jeffrey G. Herndon (including
Economic Analysis) before the APSC
D-4 Direct testimony of J. David Wright before the APSC
D-5 Order of the APSC
*F Opinion(s) of Counsel
G Financial Data Schedule
H Suggested form of notice of proposed transactions for
publication in the Federal Register
b. Financial Statements:
- Financial Statements of AP&L and Entergy Corporation and
subsidiaries, consolidated, each as of December 31,
1994.
- Notes to financial statements of AP&L and Entergy
Corporation and subsidiaries, consolidated, included in
the Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (filed in File Nos. 1-10764 and 1-
11299, respectively, and incorporated herein by
reference).
Except as reflected in the financial statements (including
the notes thereto) there have been no material changes, not in the
ordinary course of business, with respect to AP&L or Entergy
Corporation that have taken place since December 31, 1994.
_________________________________________
* To be supplied by amendment.
<PAGE>
Item 7. Information as to Environmental Effects.
a. As more fully described in Item 1, the proposed transactions
subject to the jurisdiction of the Commission involve the subleasing
of railcars and, as such, do not involve a major Federal action having
a significant impact on the human environment.
b. Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies have duly
caused this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
ARKANSAS POWER & LIGHT COMPANY
LOUISIANA POWER & LIGHT COMPANY
MISSISSIPPI POWER & LIGHT COMPANY
NEW ORLEANS PUBLIC SERVICE INC.
SYSTEM FUELS, INC.
By: /s/ Gerald D. McInvale
Gerald D. McInvale
Senior Vice President and
Chief Financial Officer
Dated: April 12, 1995
<PAGE>
Exhibit D-1
BEFORE THE
ARKANSAS PUBLIC SERVICE COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ARKANSAS )
POWER & LIGHT COMPANY FOR ) DOCKET NO. 94-_____-U
APPROVAL OF ACCOUNTING )
PROCEDURES FOR COAL COSTS )
APPLICATION OF ARKANSAS POWER & LIGHT COMPANY
COMES Arkansas Power & Light Company ("AP&L" or
the "Company"), and for its Application states:
1. This Application is filed pursuant to Rule
4.04 of the Arkansas Public Service Commission Rules of
Practice and Procedure and the Commission order dated
April 10, 1979, in Docket No. U-2989 in which the
Arkansas Public Service Commission ("APSC" or the
"Commission") adopted the uniform system of accounts
and regulations governing the preservation of records
promulgated by the Federal Energy Regulatory Commission
("FERC"), the National Association of Regulatory
Utility Commissioners and the Federal Communications
Commission relative to electric, gas, water and
telephone utilities.
2. AP&L is a corporation organized under the
laws of the State of Arkansas. A copy of the Company's
Articles of Incorporation is on file with the
Commission and is incorporated herein by reference.
3. The subject matter of this Application is the
accounting treatment, for purposes of the Fuel
Adjustment Clause Rate Rider Schedule M27 ("Fuel
Adjustment Clause"), associated with a proposed lease
of aluminum railcars, or gondolas, to replace the
existing fleet of leased steel gondolas that are used
to transport coal for use as fuel in the White Bluff
Steam Electric Station ("White Bluff") and Independence
Steam Electric Station ("ISES").
4. These two generating stations, each of which
consists of two nominally rated 800 MW coal-fired
generating stations, are operated by AP&L. The Company
has partial ownership in White Bluff Units 1 and 2 and
ISES Unit 1. As more fully described in the direct
testimony of Mr. Roy Giangrosso, coal for White Bluff
and ISES is supplied under contractual arrangements
with Kerr McGee Coal Corporation and North Antelope
Coal Company, respectively, from mines located in the
Powder River Basin in Wyoming and, in small quantities,
from spot purchases on the open market.
5. Transportation of the coal from the mines in
Wyoming to the generating stations in Arkansas
currently is provided pursuant to contractual
arrangements with Union Pacific System and Western
Railroad Properties, Inc. (the "Railroads"). As a
result of negotiations with the Railroads, AP&L has the
opportunity to enter into an amended rail
transportation agreement that provides significant
reductions in coal transportation rates. The
amendment, however, is dependent upon AP&L obtaining
aluminum railcars, which are significantly lighter than
the existing steel railcars and can carry more coal per
railcar. The terms and conditions of this proposed
amendment are more fully described in the direct
testimony of Mr. Giangrosso.
6. The proposed lease of aluminum gondolas and
the resulting decrease in transportation rates
negotiated with the Railroads is projected to save
$95.1 million on a net present value basis for the
period 1995 through 2035, the year in which the last
coal unit retires. The portion of these savings
attributable to AP&L retail customers is estimated to
be $22.0 million. The results of an economic
evaluation and analysis documenting these savings
projections are included, in redacted form, in the
direct testimony of Mr. Jeffrey G. Herndon. A Motion
for Protective Order accompanies this Application
seeking Commission authorization to file this study
under seal so as to comply with confidentiality
provisions in an agreement between AP&L and the
Railroads.
7. The projected savings represent the net of
costs associated with the existing lease of steel
railcars at the existing contractual transportation
rate as compared to the proposed lease of aluminum
railcars at the new transportation rate negotiated with
the Railroads. These savings assume that all the costs
of the existing steel railcars leases will continue to
be treated as fuel expense for the life of these
leases. These savings could be enhanced by sub-lease
of the existing steel railcars to others or net benefit
of lease termination after sale of the steel railcars
to others by the lessor. As described in the testimony
of Mr. J. David Wright, the Company believes that the
costs associated with the aluminum railcar lease, the
existing steel railcar lease and any offset thereto due
to disposition of the existing steel railcars, are
properly accounted for in the Uniform System of
Accounts as fuel expenses in Account 501 - Fuel for all
purposes under the Company's Fuel Adjustment Clause.
AP&L seeks a ruling from the Commission confirming the
Company's interpretation before it enters into the
aluminum railcar lease and related obligations or, in
the alternative, a waiver of, and permission to deviate
from, such accounting requirements.
8. Approval of the Company's Application is in
the public interest because it would significantly
reduce coal costs which are passed through to AP&L's
customers on a current basis through the Fuel
Adjustment Clause. Absent the accounting treatment
described above, the project will not be economically
feasible.
9. AP&L requests that the service list in this
proceeding include:
James P. Herden
Director, Regulatory Affairs
Arkansas Power & Light Company
P.O. Box 551
Little Rock, AR 72203
(501) 377-4475
Edward B. Dillon, Jr.
Mitchell, Williams, Selig, Gates & Woodyard
320 West Capitol Avenue, Suite 1000
Little Rock, AR 72201
(501) 688-8800
WHEREFORE, AP&L respectfully requests the
Commission to issue an order approving the accounting
treatment for the proposed aluminum gondola lease
described herein or, in the alternative, a waiver of,
and permission to deviate from, such accounting
requirements, and for all other appropriate relief.
Respectfully submitted,
ARKANSAS POWER & LIGHT COMPANY
By:
Steven K. Strickland
Coordinator, Regulatory Affairs
c: Mr. Louis H. Fish
Vice President
Power Supply & Delivery
Arkansas Electric Cooperative Corp.
P.O. Box 194208
Little Rock, AR 72219-4208
Mr. William Hegeman
General Manager
Conway Corporation
P.O. Box 99
Conway, AR 72032
Mr. James Reed, Manager
City Water & Light Plant
400 East Monroe
Jonesboro, AR 72401
Mayor Charles R. Kennemore
City of Osceola
P.O. Box 443
Osceola, AR 72370
Mr. William H. Johnson
General Manager
West Memphis Utility Commission
P.O. Box 1868
West Memphis, AR 72301
Mr. Max Sherman
Manager, EPI Business Development
900 South Shackleford, Suite 210
Little Rock, AR 72211
CERTIFICATE OF SERVICE
I, Steven K. Strickland, do hereby certify that a
copy of the foregoing has been served upon all parties
of record this 13th day of December 1994.
__________________________
Steven K. Strickland
<PAGE>
Exhibit D-2
BEFORE THE
ARKANSAS PUBLIC SERVICE COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ARKANSAS )
POWER & LIGHT COMPANY FOR ) DOCKET NO. 94-_____-U
APPROVAL OF ACCOUNTING )
PROCEDURES FOR COAL COSTS )
DIRECT TESTIMONY
OF
ROY A. GIANGROSSO
DIRECTOR, COAL SUPPLY
ENTERGY SERVICES, INC.
ON BEHALF OF
ARKANSAS POWER & LIGHT COMPANY
DECEMBER 13, 1994
<PAGE>
Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
A. Roy A. Giangrosso. My business address Entergy
Services, Inc., P. O. Box 2951, Beaumont, Texas
77704.
Q PLEASE DESCRIBE YOUR WORK AND EDUCATIONAL
EXPERIENCE.
A. I hold a Bachelor of Science degree in Electrical
Engineering from University of Southwestern
Louisiana, a Master of Engineering degree from
Tulane University and have completed further post
graduate studies in business and finance. I am a
Registered Professional Engineer in civil and
electrical engineering in the state of Louisiana and
a Registered Professional Engineer in the state of
Mississippi. I joined the Entergy System as
Assistant Engineer in the NOPSI Engineering
Department in 1965. In 1972, I became an Engineer
in NOPSI's Electric System Planning Division. In
1978, I became a Senior Engineer in the newly formed
Energy Procurement Department of NOPSI. In 1980, I
was named manager of the Energy Procurement
Department. This department had the responsibility
of planning, acquiring, and managing NOPSI's fuel
supplies. Upon functional consolidation of NOPSI
and LP&L, the name of the department was changed to
Fossil Fuel Supply. I was named Director, Fossil
Fuel Supply in 1985. Effective January 1, 1991, all
System fuel matters were consolidated at Entergy
Services, Inc., ("ESI") in the newly created Fuels
Management Department. At that time I was named
Director of Gas Supply. On April 1, 1992, I became
Director of Coal Supply in a managerial rotation
within the fuels management organization of ESI, and
effective October 1, 1993, I reassumed the position
of Director of Gas Supply. On January 1, 1994, I
assumed responsibility for coal acquisition
activities in the newly created Fuels and System
Operations Department of ESI.
Q. WHAT ARE YOUR RESPONSIBILITIES IN THIS POSITION?
A. In my current position, I am responsible for
directing the activities of coal acquisition and
supply for Entergy System operating companies that
have coal operations or ownership in coal plants --
Arkansas Power & Light Company ("AP&L" or the
"Company"), Gulf States Utilities, and Mississippi
Power & Light Company.
Q. ON WHOSE BEHALF ARE YOU SUBMITTING THIS TESTIMONY?
A. I am submitting this testimony on behalf of AP&L.
Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?
A. I will provide an overview of AP&L's proposal to
enter into a lease arrangement with Johnstown
America Corp. for aluminum rail cars that would be
utilized to transport coal from mines currently
under contract to provide coal for fuel to the White
Bluff Steam Electric Station ("White Bluff") and
Independence Steam Electric Station ("ISES"). In
addition, Mr. Jeff Herndon, ESI Senior Fuels
Planning Engineer, will provide testimony describing
his analysis and evaluation demonstrating the
economic advantages to AP&L, its customers and co-
owners of leasing aluminum railcars. Finally, Mr.
David Wright, ESI Manager of Regulatory Accounting,
will describe the proposed accounting treatment of
these costs.
Q. PLEASE DESCRIBE AP&L'S CURRENT USE OF COAL AND THE
EXISTING COAL TRANSPORTATION ARRANGEMENTS.
A. White Bluff and ISES each has two nominal 800 MW
generating units fueled primarily by Powder River
Basin coal from Wyoming. AP&L operates these plants
on its own behalf and on behalf of its co-owners in
the plants. AP&L's ownership interest consists of
57 percent of White Bluff and 31.5 percent of ISES
Unit 1.
Current fuel forecasts estimate the combined
coal requirements for both plants to be
approximately 13.5 million tons annually. Two long-
term coal supply contracts for coal from the Powder
River Basin region form the basis of supply. The
Kerr McGee Jacobs Ranch Mine Coal Supply Agreement
was executed as the primary supply for White Bluff's
requirements. The North Antelope Coal Company North
Antelope Mine Coal Supply Agreement was executed to
be the primary supply for ISES' coal requirements.
Together, these two contracts will supply between 10
to 11 million tons annually. Additional coal
supplies to meet the anticipated 13.5 million ton
annual requirement will be purchased on the spot
market from sources having acceptable quality coal.
Coal transportation from the Powder River Basin
to White Bluff and ISES is provided in unit-train
service by Western Railroad Properties, Inc., and
Union Pacific Railroad (collectively, the
"Railroads"). A coal unit-train is approximately
115 railcars or gondolas loaded with coal having the
same destination. A fleet of 2,225 steel gondolas,
supplemented by additional lease gondolas as
required, is provided by AP&L to the Railroads for
unit-train makeup. Approximately 20 unit-train sets
with spares and maintenance gondolas are required to
move 13.5 million tons per year.
Q. WHAT IS THE ADVANTAGE OF USING ALUMINUM RAIL CARS
FOR TRANSPORTATION OF COAL?
A. The advantage to AP&L and its customers is reduced
freight costs. The use of aluminum gondolas in this
same service would reduce the total number of train
trips needed to deliver the same amount of coal.
Aluminum gondolas carry approximately 120 tons of
coal in each gondola while the maximum load for the
current steel gondolas is 106 tons. The Railroads
save the variable cost on the unit-trains not moved.
In addition, the Railroads free up power and crews
to move new business at minimal cost. Because of
the savings realized by the Railroads, they are
willing to share some of the savings with AP&L
through reduced freight rates.
Q. YOU STATED EARLIER THAT THE LEASE AGREEMENTS ON THE
EXISTING STEEL RAIL CAR FLEET DO NOT EXPIRE UNTIL
VARIOUS DATES IN 1999 TO 2002. WHAT WILL BECOME OF
AP&L'S OBLIGATIONS UNDER THESE LEASES?
A. Unless these leases are terminated, the obligations
under the leases will continue in effect until
expiration. We will diligently pursue a sublease or
sale of the steel railcars or other avenues that
will either provide a stream of income or a cash
payment to fully or partially offset the continuing
payment obligation or the lease termination
payments. The worst-case scenario would be that no
income could be generated from sublease of the steel
railcars and the lease payments would continue until
lease expiration. Even in this worst case, the
economic analysis, which will be discussed in
greater detail in Mr. Herndon's testimony, still
shows a positive net present value with positive
estimated annual cash flows in each year.
Q. HOW WILL AP&L'S CUSTOMERS BENEFIT BY THE COMPANY
ENTERING INTO LEASE AGREEMENTS FOR ALUMINUM RAIL
CARS WHILE CONTINUING TO BE OBLIGATED UNDER THE
LEASE AGREEMENTS FOR THE EXISTING STEEL CAR FLEET?
A. The total cost associated with the transportation of
coal in unit-train service includes (1) lease
payment costs for gondolas, (2) maintenance costs on
the gondolas, and (3) freight cost paid to move the
product. These three cost components are calculated
for a Base Case, wherein the steel gondolas are used
until lease expiration and then replaced with
aluminum gondolas for the remaining life of the
project, and an Aluminum Gondola Case, wherein new
aluminum gondolas are purchased in 1995 and used to
transport coal for the remaining project life. A
freight cost reduction is applied to the freight
cost of the Aluminum Gondola Case as provided by the
Railroads. The difference in total cost between the
Base Case and the Aluminum Gondola Case represents
the savings associated with using aluminum gondolas.
For an assumed annual movement of 13.5 million tons
and no subleasing income, the net present value of
this project for the first ten years is $44.0
million or a total of $95.1 million over the project
life, all in 1995 dollars, for all ownership
interests. If one assumes sufficient income to
offset 50 percent of the steel gondola lease
payments, the net present value increases to $61.0
million in the first ten years and $112.1 million
for the total project life, again measured in 1995
dollars for all ownership interests. If sufficient
income is assumed to offset 100% of the steel
gondola lease payments, the net present value
increases to $74.5 million in the first ten years
and $125.6 million for project life total for all
ownership interests. Even with the extreme
assumption of no subleasing income, all annual cash
flow differences between the Base Case and the
Aluminum Gondola Case are positive.
AP&L would share in these total savings
according to its energy usage and ownership interest
in the coal plants. Specifically, the Company's
retail customers would realize in 1995 dollars a
projected net present value for the first ten years
of $5.0 million or a total of $22.0 million over the
project life, assuming no income to offset the
existing steel railcar lease costs. A more detailed
description of the economic advantages and
derivation of these projected savings in AP&L's
proposal is contained in the testimony of Mr.
Herndon.
Q. WHAT ARE THE RISKS ASSOCIATED WITH AP&L'S ENTERING
INTO THE LEASING ARRANGEMENTS FOR THE ALUMINUM RAIL
CARS?
A. The freight rate reduction provided by the Railroads
for aluminum gondola use is applied in a tier
pricing arrangement weighted heavily to high annual
deliveries. If the requirements at White Bluff and
ISES were to become less than the estimated 13.5
million tons annually, then the amount of savings
available to this project would be reduced. In
addition, sublease or sale income for the existing
steel railcars is limited to what the market will
bear. Currently, the sub-leasing market is quite
attractive. However, the marketing of 2,225
gondolas is expected to have some downward bias
impact on this market, resulting in driving down the
potential income.
Q. WHY SHOULD THE COSTS OF THIS SECOND LEASE BE FLOWED
THROUGH THE FUEL ADJUSTMENT CLAUSE AS A FUEL
EXPENSE?
A. As is described in the testimony of Mr. Wright, the
costs associated with the lease of the aluminum
railcars would be classified as a fuel related
expense. Because of this and because the combined
net effect is a lower fuel expense, it is
appropriate to flow these costs through AP&L's Fuel
Adjustment Clause Rider M27 ("Fuel Adjustment
Clause") in AP&L's electric rates. In addition, by
using the Fuel Adjustment Clause, the savings from
the lease of aluminum rail cars will automatically
flow through to AP&L's customers.
Further, the project is not economically
feasible to AP&L unless it can continue to recover
the existing lease cost of the steel railcars,
offset by any income from disposition of these steel
railcars, in addition to recovering the lease cost
of the new aluminum railcars. Without Commission
approval of the requested accounting treatment of
these lease costs, AP&L would not have sufficient
assurance that its costs would be recovered to allow
it to enter into the agreements that would result in
these significant savings for its customers.
Q. IS TIMING A CONSIDERATION IN YOUR ABILITY TO REALIZE
THESE SAVINGS?
A. Yes. The AP&L and Entergy boards of directors have
approved this project subject to our securing
regulatory concurrence of the proposed accounting
treatment with the APSC. We have negotiated a
priority in the waiting line with the manufacturer
of the aluminum railcars that is dependent upon
approval of this Application. If we do not proceed
with a final order of the aluminum railcars in a
timely fashion, then we will lose our place in line
which would endanger our ability to provide aluminum
railcars by August 1, 1995, in compliance with our
agreement for lower freight rates from the
Railroads. In addition, any delay may have a
significant effect upon the lease rates of the
aluminum cars and other cost variables, especially
the market for sub-lease of our existing steel
railcars. We know that other utilities are
examining conversion to aluminum railcars and that
many steel railcars are about to come into the
secondary lease market. The market now is very
strong, but if we do not act soon, the market price
for sub-lease of our existing steel railcars will
decline substantially. For this reason, we have
asked for expedited treatment of this Application.
Q. DOES THIS CONCLUDE YOUR TESTIMONY AT THIS TIME?
A. Yes.
<PAGE>
Exhibit D-3
BEFORE THE
ARKANSAS PUBLIC SERVICE COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ARKANSAS )
POWER & LIGHT COMPANY FOR ) DOCKET NO. 94-_____-U
APPROVAL OF ACCOUNTING )
PROCEDURES FOR COAL COSTS )
DIRECT TESTIMONY
OF
JEFFREY G. HERNDON
SENIOR FUELS PLANNING ENGINEER
ENTERGY SERVICES, INC.
ON BEHALF OF
ARKANSAS POWER & LIGHT COMPANY
DECEMBER 13, 1994
<PAGE>
Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
A. Jeffrey G. Herndon. My business address is Entergy
Services, Inc., P.O. Box 2951, Beaumont, TX 77704.
Q PLEASE DESCRIBE YOUR WORK AND EDUCATIONAL EXPERIENCE.
A. I hold a Bachelor of Science Degree from the
University of Missouri - Rolla Campus. I am a
Registered Professional Engineer in civil engineering
in the states of Illinois and Louisiana. I joined
Peabody Coal Company in 1976. As Field Engineer, I
provided support engineering services to operating
coal mines in southern Illinois. In 1978, I joined
System Fuels, Inc. ("SFI"), the fuels subsidiary of
the Operating Companies of Entergy Corp., then Middle
South Utilities. My duties at SFI included
performance of financial analyses for proposed
projects, contract negotiation support for fuel
contract negotiations and mine engineering support for
the North Antelope Coal Supply Agreement
administration. In 1986, SFI elected to release its
employees to other Entergy subsidiaries. As a result,
I reported to the Engineering Department at Middle
South Services, Inc. (now Entergy Services, Inc. or
"ESI"). My duties as technical and analytical support
of coal acquisition and transportation operations
continued. I assumed my current position as Senior
Fuels Planning Engineer on August 1, 1988. In this
position, I develop strategic fuel utilization plans,
perform project analysis, develop fuel inventory
strategies and analyze alternative fuel opportunities
for the Entergy System.
Q. ON WHOSE BEHALF ARE YOU PRESENTING THIS TESTIMONY?
A. I am presenting this testimony on behalf of Arkansas
Power & Light Company ("AP&L" or the "Company").
Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?
A. I will describe the results of my economic evaluation
of AP&L's entering into a lease of 120-ton aluminum
railcars for transportation of coal to replace
existing 106-ton steel railcars in the Company's
capacity as operator of the White Bluff Steam Electric
Station ("White Bluff") and the Independence Steam
Electric Station ("ISES"). These results are
presented in the report entitled The Economic Analysis
of Replacing the Steel Gondola Fleet with Aluminum
Prior to Lease Termination (the "Study"). The Study
contains information which is subject to a
confidentiality provision in the Interim Rail
Transportation Agreement between AP&L and the
Railroads dated October 1, 1991. In order to comply
with these confidentiality provisions, AP&L has filed
a Motion for Protective Order with its Application in
this Docket seeking to file the Study under seal. A
redacted version of the Study accompanies my testimony
as AP&L Exhibit JGH-1.
Q. PLEASE DESCRIBE YOUR ECONOMIC EVALUATION OF THE
PROPOSED LEASE OF ALUMINUM RAILCARS.
A. In order to evaluate the economic attractiveness of
providing aluminum gondolas, costs for a Base Case and
an Aluminum Gondola Case were developed. The Base
Case represents what would happen if AP&L continued to
lease and use the existing steel railcars until the
present leases expire. To meet projections of
increased coal capacity needs, an additional fleet of
544 steel gondolas was leased for a two-year period.
The Base Case also assumes that 345 additional
aluminum gondolas will be acquired in 1996 to satisfy
this increased capacity need for the long term. The
use of these aluminum gondolas is assumed to result in
some freight rate reduction, but not nearly as much as
the reduction that is available for wholesale fleet
change-out of the existing steel railcars for aluminum
railcars.
The Base Case also assumes that as the existing
steel gondola leases expire, replacement aluminum
gondola leases are acquired. Fewer aluminum gondolas
are needed to replace the steel gondolas because of
the greater hauling capacity of the aluminum gondolas.
Between the years 1998 and 2004, 1,944 aluminum
gondolas replace 2,225 steel gondolas as the existing
steel railcar leases expire. With the previously
acquired 345 aluminum gondolas, the transportation
capacity is sufficient to haul 13.5 million tons per
year. While there is no guarantee that there would be
any future freight rate reduction, it is assumed that
the freight rate reduction for aluminum gondolas in
the Base Case is 60% of the freight rate reduction
available for the Aluminum Gondola Case because the
Base Case is not burdened with the cost of existing
gondola lease payments.
The Aluminum Gondola Case assumes new aluminum
gondola leases will be acquired in the year 1995 to
move White Bluff and ISES coal requirements. To move
the anticipated tonnage requirement, 2,289 aluminum
gondolas are leased. The existing steel gondola
leases are allowed to continue until lease expiration.
The existing steel fleet plus the 544 steel gondola
addition are parked until their respective leases
expire. A parking charge is included at $1.25 per
gondola per day for the steel gondolas A freight rate
reduction has been obtained for coal movement in
aluminum gondolas. The freight cost for the Aluminum
Gondola Case is completely based on the reduced
aluminum freight rates beginning in 1996. Because
there are both aluminum and steel gondolas in use in
1995, the freight cost in 1995 is based on proration
of steel and aluminum freight rates for the first 10
million tons and only aluminum freight rates above 10
million tons.
Q. WHAT TYPES OF COSTS ARE INCLUDED IN YOUR EVALUATION
FOR THE BASE CASE AND THE ALUMINUM GONDOLA CASE?
A. The cost to transport coal from the coal field in
Wyoming to the power plants in Arkansas for either
case can be divided into three categories. The first
category includes all costs associated with lease
payments for all existing AP&L steel and/or aluminum
railcars or gondolas. The second category includes
all costs to maintain and operate these steel and/or
aluminum gondolas. The last category includes all
freight costs paid to the railroads. The sum of these
three category costs represents the total cost for the
respective case.
The lease costs for the Aluminum Gondola Case are
substantially greater than the lease costs contained
in the Base Case because the Aluminum Gondola Case
includes the cost for both the existing steel gondola
and the new aluminum gondola fleets. Maintenance
costs for this second case include maintenance costs
for aluminum gondolas, which are equal to the
maintenance costs for steel gondolas, except for the
lower maintenace costs for new aluminum gondolas in
the maintenance build-up period. However, freight
rates for aluminum gondolas are significantly less
than steel gondola freight rates. These rate
reductions are applied in accordance with the schedule
of aluminum cars being placed into service.
Q. PLEASE DESCRIBE THE DEVELOPMENT OF THE LEASE COSTS
THAT WENT INTO YOUR EVALUATION.
A. Lease payments are developed from lease capital
estimates and lease rental factors. Lease capital
estimates are based on $51,000 per railcar. We have
received quotations for new aluminum gondolas from
three manufacturers at approximately that cost. Refer
to Schedule 1 of the Study for pricing and production
scheduling for new aluminum gondolas. We have also
received a Letter of Intent from Johnstown America
Corp. (previously Bethlehem Steel Freight Car
Division) for delivery of new aluminum gondolas for
under $50,000 per railcar. The lease rental factor
was provided by the ESI Corporate Finance Department
as representative of 20-year lease terms in the
current capital lease market.
Q. PLEASE DESCRIBE THE WAY IN WHICH YOU MODELED
MAINTENANCE COSTS IN YOUR STUDY.
A. Maintenance costs are assumed to be the same for
aluminum and steel gondolas loaded greater than 100
tons. On the basis of 1993 maintenance cost and
increased by 30 percent for heavier loading, $2,920
per year (1993 dollars) per gondola is assumed. New
gondolas, however, have a six-year break-in period
where the maintenance cost is less than the typical
cost of an older gondola. In the Base Case,
maintenance costs for the steel gondolas continue
through lease expiration. The 345 aluminum gondolas
that would be acquired in 1996 would start a six-year
maintenance build-up period beginning in 1996. The
1,944 replacement aluminum gondolas acquired as the
steel gondola leases expire start a six-year
maintenance build up period beginning the year of
acquisition. By the year 2008, all maintenance build-
up periods have past.
Q. WHAT IS THE BASIS FOR YOUR ESTIMATES OF FREIGHT RATES
IN YOUR EVALUATION?
A. For the Base Case, steel gondola and aluminum gondola
freight rates are used in proportion to the percentage
of total gondolas in a given year. For example, in
1996 the Base Case assumes a fleet of 345 aluminum
gondolas and 2,339 steel gondolas. Therefore, the
freight cost is based on 12.854% aluminum gondola
rates and 87.146% steel gondola rates. This
proportional pricing is used through the year 2002
when the last steel gondola is in use. For all years
beyond 2002, the freight cost is based on 100%
aluminum gondola rates. As stated earlier, the
aluminum gondola freight rates in the Base Case are
assumed to be greater than the Aluminum Gondola Case
freight rates.
The freight rates for the Aluminum Gondola Case
have been agreed to in negotiations with our current
transportation suppliers.
Q. WHO CURRENTLY PROVIDES TRANSPORTATION FOR THE COAL
RAILCARS?
A. The Western Railroad Properties, Inc. and the Union
Pacific Railroad (the "Railroads") transport coal for
AP&L.
Q. WHY HAVE THEY OFFERED REDUCED FREIGHT RATES TO AP&L?
A. The Railroads have offered a freight rate reduction to
AP&L if the coal movement would be made in aluminum
gondolas. The Railroads benefit from the use of
aluminum gondolas because fewer trains move to deliver
the same quantity of coal. This is a benefit to the
Railroads because extra crew shifts and extra power
are made available for new business. This benefit
only becomes available to the railroads through the
use of aluminum gondolas. Because AP&L is responsible
for providing gondolas to the Railroads for this
movement, the Railroads need to provide some incentive
to AP&L to make the replacement attractive.
Q. WHAT IS THE RESULT OF YOUR EVALUATION OF THE BASE
CASE?
A. Detailed annual cash flow projections for the Base
Case are found in Schedule 7 to the Study. This
Schedule shows the total cost estimated for lease,
maintenance and freight costs for the Base Case.
Total lease costs include 1) lease payments for the
existing steel gondolas, 2) rental payments for the
544 additional steel gondolas currently in AP&L's
control, 3) lease payments for the 345 aluminum
gondolas needed for capacity expansion that replace
the 544 steel gondolas in 1996, and 4) lease payments
for the 1,944 aluminum gondolas purchased when the
steel railcar leases expire. The total maintenance
costs include 1) estimated maintenance cost for the
existing steel gondolas through lease expiration, 2)
maintenance payment requirements on the 544 additional
steel gondolas, 3) maintenance cost estimates for the
345 new aluminum gondolas purchased in 1996, and 4)
maintenance cost estimates for the new aluminum
gondolas purchased as the steel gondola leases expire.
Q. PLEASE DESCRIBE THE RESULTS OF THE ALUMINUM GONDOLA
CASE EVALUATION?
A. Cash flows for the Aluminum Gondola Case are treated
similarly to the Base Case cash flows. Detailed
annual cash flow projections for the Aluminum Gondola
Case are found in Schedule 8 to the Study. This
Schedule contains the total cost estimates for lease,
maintenance and freight costs for the Aluminum Gondola
Case. Total lease costs include 1) lease payments for
the existing steel gondolas, 2) rental payments for
the 544 additional steel gondolas currently in AP&L's
control, and 3) lease payments for 2,289 aluminum
gondolas purchased during the year 1995, and 4)
parking costs for the steel gondolas. Total
maintenance costs include 1) estimated maintenance
cost for the existing steel gondolas through lease
expiration, 2) maintenance payment requirements on the
544 additional steel gondolas, 3) estimated
maintenance cost for the 345 new aluminum gondolas
purchased in 1996, and 4) estimated maintenance cost
for the new aluminum gondolas purchased as the steel
gondola leases expire.
Q. HOW DO YOU MODEL THE COSTS ASSOCIATED WITH THE
EXISTING STEEL RAILCAR LEASES IN THE ALUMINUM GONDOLA
CASE?
A. The Aluminum Gondola Case assumes complete replacement
of the existing steel gondola fleet during 1995. As a
conservative assumption, the Aluminum Gondola Case
assumes no income from any disposition of the existing
steel gondolas. Therefore, the cash flows contained
in Schedule 8 are based on the assumption that no
subleasing, sales or other source of income would be
available to offset some or all of the steel gondola
lease payments. Parking costs for the steel gondolas,
which are no longer used, are included in the Aluminum
Gondola Case. Under the worst case situation, the
steel gondola fleet would be parked until lease
termination.
Q. WHICH CASE RESULTS IN THE MOST ECONOMIC COAL
TRANSPORTATION COSTS?
A. Even under the worst-case assumption, the Aluminum
Gondola Case results in less overall coal
transportation costs as compared to the Base Case of
$44.0 million on a net present value ("NPV") basis for
the initial ten years of the project, 1995-2004. The
total savings to be realized until the last coal unit
retires in 2035 are estimated at $95.1 million. This
level of savings is shown in Schedule 9-A, which
presents the difference in estimated total cash flows
between the Base Case (Schedule 7) and the Aluminum
Gondola Case (Schedule 8). Significantly, Schedule 9-
A projects that in each year the net cash flow for the
Aluminum Gondola Case is greater than the net cash
flow for the Base Case.
Q. YOU STATED EARLIER THAT THE ALUMINUM GONDOLA CASE WAS
CONSERVATIVE IN ASSUMING THAT NO OFFSET TO THE
EXISTING STEEL RAILCAR LEASES COULD BE REALIZED? TO
WHAT EXTENT WOULD THESE SAVINGS IMPROVE IF SOME
DISPOSITION OF THE EXISTING STEEL RAILCARS COULD BE
MADE?
A. Significantly. The used steel gondola leasing market
is currently very strong. Recent used gondola leases
have gone for as much as $475/gondola/month plus
maintenance costs. It is believed that this used
gondola market would provide some income for the steel
gondolas to offset the ongoing lease costs, if certain
restictions by the Securities and Exchange Commission
and the owners were relaxed.
I have prepared two alternate summary cash flows
for the Aluminum Gondola Case on the assumptions that
1) the steel gondola lease payments could be offset by
50 percent and 2) that these payments could be wholly
offset. These alternative summary cash flow estimates
for the Aluminum Gondola Case are presented as
Schedules 9-B and 9-C, respectively, to the Study. As
one would expect, the net cash flow difference between
the Base Case and the alternative cash flow estimates
for the Aluminum Gondola Case increases substantially.
For the 50 percent offset, Schedule 9-B of the Study
shows that the savings on a NPV basis for the first 10
years of the project life are estimated at $61.0
million dollars and $112.1 million for the life of
project NPV savings. Further, if we are able to
completely offset the cost of the existing steel
railcar leases, Schedule 9-C shows that the NPV
savings, for the Aluminum Gondola Case as compared to
the Base Case, are projected at $74.5 million for the
first ten years, and $125.6 million for the life of
the project.
Q. HAVE YOU DETERMINED WHAT PORTION OF THESE TOTAL COAL
TRANSPORTATION SAVINGS WOULD ACCRUE TO AP&L'S RETAIL
CUSTOMERS?
A. Yes. I have estimated the AP&L retail customers'
portion of the total savings described above by using
the PROMOD results LC 215-216 which is the production
cost modeling run used by Entergy to develop its Least
Cost Integrated Resource Plan filed with this
Commission on December 1, 1992. For each year, 1995 -
2012, the annual coal energy estimates (MWh) retained
to satisfy AP&L's Net Area Requirement is divided by
the total coal energy estimates (MWh). This ratio is
then multiplied by the annual total coal consumed to
determine the amount of coal consumed on behalf of
AP&L's retail customers. The effective annual
increase in tons consumed on behalf of AP&L's retail
customers from 2008 through 2012 (2.586%) also is used
to determine the tons consumed on behalf of AP&L's
customers from 2013 through 2030. For the years 2013-
2030, the effective annual growth between the years
2008-2012 in tons consumed on behalf of AP&L's retail
customers (2.586%) is used to project tons consumed by
multiplying the previous year consumption by 1.02586.
For the years 2031-2033, the percent of AP&L ownership
in ISES is used to determine appropriate savings to
AP&L's customers in the years 2031 through 2038.
The PROMOD results LC 215-216 present estimated
energy requirements for AP&L prior to the merger of
Entergy with Gulf States Utilities. Coal energy
forecasted includes only White Bluff and ISES energy.
It is also assumed that the tons needed to satisfy
AP&L's Net Area Requirements under PROMOD results LC
215-216 would be representative of the coal energy
that would be forecasted to be retained in AP&L's Net
Area Requirements. As shown in Schedule 10 to the
Study, the net present value of the savings that would
accrue to AP&L's retail customers is $5.0 million
between 1995 and 2004. Over the project life, the net
present value savings to AP&L retail customers will
grow to $22.0 million.
Q, HAVE YOU CONDUCTED ANY SENSITIVITY ANALYSES TO
DETERMINE WHICH VARIABLES IN YOUR ANALYSIS ARE MOST
SENSITIVE TO THE OUTCOME?
A. Yes, I have. My sensitivity analysis was designed to
determine which variables were most sensitive in
determining the outcome of the savings associated with
the Aluminum Gondola Case. The variables I included
in this analysis were 1) the aluminum gondola freight
rates effective in 1995, 2) the aluminum gondola
freight rates that would be effective upon steel lease
termination, 3) annual tons shipped, 4) leasing rent
factors effective 1995, 5) leasing rent factors
effective upon steel lease termination, 6) steel
gondola income sub-leasing or other sources to offset
lease payments, 7) steel gondola maintenance, 8)
aluminum gondola maintenance, and 9) aluminum gondola
price. Schedule 11 is a graphic depiction of the
results of the sensitivity analysis. This graphic
depiction is known as a "tornado chart" for its funnel-
like depiction of the results. The sensitivity
analysis takes a nominal savings case and varies the
resulting savings by substituting the low value and
then the high value of each variable while maintaining
the nominal value for all other variables. The
variables are then sorted in descending order by the
resulting difference in the high and the low results.
As shown on Schedule 11, the first variable, aluminum
gondola freight rates effective in 1995, was the most
sensitive variable. This variable swings the NPV
results by approximately $308 million. However, as I
stated earlier, the aluminum gondola freight rate is
among the most certain of variables in the Study
because we have already negotiated a rate with the
Railroads subject to our supplying aluminum railcars.
This variable is three times more sensitive than the
second most sensitive variable, the aluminum gondola
rates effective upon steel lease termination, and six
times more sensitive than the third most sensitive
variable, the annual tons shipped. The values of the
variables assumed in the sensitivity analysis are
shown in the Study.
Q. PLEASE SUMMARIZE YOUR TESTIMONY.
A. AP&L has an opportunity to acquire, through lease,
aluminum railcars that would allow AP&L to take
advantage of significant transportation rate
reductions negotiated with the Railroads that
currently transport coal from mines in Wyoming to the
AP&L coal plants in Arkansas. These coal
transportation cost reductions would provide
significant energy savings to AP&L's retail customers
and its co-owners in White Bluff and ISES. My
evaluation and analysis indicates that, even if AP&L
could not offset any of the cost of the existing steel
railcar leases, total coal transportation savings on a
NPV basis would be $44.0 million for the years 1995
through 2004 and $95.1 for the life of the project
through 2035. The portion of these NPV savings that
would accrue to AP&L's retail customers based on its
projected need for coal energy to supply the Company's
Net Area Requirements and its ownership of the coal
plants is $5.0 million for the initial ten years and
$22.0 million for the life of the project. The total
savings and AP&L's retail customer portion would
increase if a portion or all of the existing steel
railcar leases could be offset through sub-lease, sale
or other disposition.
Q. DOES THIS CONCLUDE YOUR TESTIMONY AT THIS TIME?
A. Yes.
<PAGE>
BEFORE THE
ARKANSAS PUBLIC SERVICE COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ARKANSAS )
POWER & LIGHT COMPANY FOR ) DOCKET NO. 94-_____-U
APPROVAL OF ACCOUNTING )
PROCEDURES FOR COAL COSTS )
AP&L EXHIBIT JHG 1
THE ECONOMIC ANALYSIS OF
REPLACING THE STEEL GONDOLA FLEET
WITH ALUMINUM PRIOR TO LEASE EXPIRATION
<PAGE>
REDACTED VERSION
THE ECONOMIC ANALYSIS
OF REPLACING THE
STEEL GONDOLA FLEET
WITH ALUMINUM
PRIOR TO LEASE EXPIRATION
Prepared by: ESI Fuel Planning & Analysis
December, 1994
<PAGE>
Background
Arkansas Power & Light Company (AP&L) is operator and part owner of two
coal fired generating stations, White Bluff and Independence Steam
Electric Stations. Each station has two units, nominally rated at 800 MW.
On behalf of AP&L, System Fuels, Inc. (SFI) leased 2,250 steel rotary dump
gondolas to carry coal from Wyoming mines to Arkansas power plants when
they began operation in the early 1980's. These steel gondolas were sized
to haul a nominal 100 tons under a gross rail weight restriction of
263,000 pounds. The average tare weight of the steel sided gondola is
58,900 pounds.
These gondolas were originally acquired in four groups each with its own
lease. The first group was built in the latter part of 1979 and early
1980. Initially, there were 600 gondolas in this group. The second group
was built in mid 1980, and consisted of 750 gondolas. The third group was
built in late 1982 and had 580 gondolas. The last group of gondolas was
built in late 1984 and was made up of 320 gondolas. All four groups were
built by Bethlehem Steel Corp., Freight Car Division at the Johnstown,
Pennsylvania facility. Bethlehem Steel Corp. sold this facility in the
late 1980's and it is now called Johnstown America Corp. In the past 14
years of service, 25 of the original gondolas were destroyed in
derailments. The total number of active gondolas remaining in all four
leases is 2,225. In 1992, SFI assigned the four leases to AP&L.
Today, the use of aluminum gondolas is standard in the industry. No new
steel gondola intended for coal service has been manufactured since 1992.
The lighter tare weight of aluminum gondolas allows for greater coal hauls
without increasing train weights. The Union Pacific and Chicago &
Northwestern Railroads (Railroads) have increased the gross rail weight
limitation from 263,000 pounds to 286,000 pounds, enabling aluminum
gondolas to haul 120 tons of coal. Recently, the Railroads have indicated
that they would be willing to negotiate aluminum gondola freight rates
that would provide substantial savings when compared to freight rates that
would be applicable to steel gondolas.
Purpose
This report is intended to evaluate and determine the economic viability
of two alternative methods of delivering coal requirements to White Bluff
and Independence Steam Electric Stations. The expected future coal
requirement is 13.5 million tons per year. The current steel fleet of
2,225 gondolas have a capacity of 11.5 million tons per year. Three
additional trainsets of gondolas are required to increase the fleet
capacity from 11.5 million tons per year to 13.5 million tons per year.
Alternatively, a new fleet of 2,289 aluminum gondolas will have a delivery
capacity of 13.5 million tons per year. In addition, the freight rates
for coal in the aluminum gondolas will be considerably less than the
freight rates for coal in steel gondolas.
Methodology
This report presents the costs of a Base Case and an Aluminum Gondola Case
and compares the cost difference between the two.
Base Case
The Base Case assumes continued steel gondola use, supplemented by the
purchase of an additional 345 gondolas for capacity expansion, through the
expiration of the current leases. This would increase annual
transportation capacity from 11.5 to 13.5 million, the current estimated
annual fuel requirement for White Bluff and Independence Steam Electric
Stations. Since three trainsets of either steel or aluminum gondolas are
required for fleet expansion and a freight rate reduction is assumed
available for the higher cost of aluminum gondolas, aluminum gondola
additions are assumed. Because the fleet expansion capability is not
burdened with existing lease payments, the amount of reduction to freight
rates does not have to be as great as the reduction needed to justify
higher aluminum gondola costs and existing lease payments. For this
reason it was assumed that the Base Case freight rates would be based on
"REDACTED INFORMATION" of the Aluminum Gondola Case freight rate savings
quoted by the Railroads for complete fleet changeout in 1995. During
freight rate discussions with the Railroads, the Railroads indicated that
it has been their experience that "REDACTED INFORMATION" per ton reduction
in freight rates was sufficient to entice use of aluminum gondolas. The
assumption of "REDACTED INFORMATION" approaches this level of freight rate
reduction.
Aluminum Gondola Case
The Aluminum Gondola Case assumes that 2,289 aluminum railcars will be
acquired in 1995. As these new gondolas are delivered, the steel gondolas
are removed from service and either parked, subleased or sold. The cost
to park the entire 2,225 steel gondola fleet at the industry's standard
rate of $1.25 per car per day would be $1,015,156/year. A parking cost
for steel gondolas is included in this study as part of total lease costs.
No further maintenance cost for the steel gondolas is assumed. Freight
rate reduction is applied as aluminum trainsets are placed in service.
Maintenance cost for aluminum gondolas is calculated in accordance with
the assumptions for maintenance cost build-up.
Costs to operate any fleet of gondolas include an ownership or lease cost,
a maintenance cost and a freight cost. All three categories will change
with the use of aluminum gondolas when compared to the same cost
categories associated with steel gondolas. A new aluminum gondola lease
at market conditions has been developed. Future maintenance costs for
both steel and aluminum gondolas have been developed. A maintenance cost
build-up period of six years for new aluminum gondolas has been included.
The reduction in the total freight cost proposed by the Railroads for the
use of aluminum gondolas has also been included.
Other options, such as rebodying of the existing steel gondola with
aluminum and modifying the existing steel gondola with sideboards, were
considered but rejected for the following reasons:
The cost to rebody the existing steel gondola with aluminum was
greater than the purchase price of a new aluminum gondola.
The sideboard extension modification to the steel gondola would
carry only 110 tons of coal at the maximum gross rail loading of 286,000
pounds. Because the capacity of this modified gondola is less than the
capacity of a 120 ton aluminum gondola, the Railroads' proposed freight
rates were substantially less attractive than the rates proposed for a 120
ton aluminum gondola.
The existing steel gondola already has experienced some center
sill cracking with loading to 108 tons. Both the aluminum rebody and the
sideboard modification options would subject the existing center sill to
even greater loading. The integrity of the existing steel gondola's
center sill becomes an even greater concern under the aluminum rebody and
sideboard modification options.
The net difference in the total cost for the Base Case and Aluminum
Gondola Case was greater than other options considered. This net
difference defines the savings associated with the Aluminum Gondola Case.
Assumptions
The following major assumptions were used in the development of costs
contained in this report.
The average annual volume to be delivered is assumed to be 13.5
million tons per year. While this delivery is representative of the
average of projected tonnage to be delivered over this time horizon,
projected annual tonnage requirements fluctuate from year to year.
Time horizon for this project is through year 2035. This date is
based on current retirement date for the last coal unit in Arkansas.
Volumes have been adjusted for individual unit retirements. Cash flows
are based on total coal requirements for White Bluff and ISES. Portions
of the savings attributed to AP&L's retail customers is estimated based on
previous PROMOD modeling.
The aluminum gondola fleet size is based on contractual services
standard time for one round trip from the mines to the plants and back
plus loading and unloading time, 115 car trains, 5% spare cars and one
maintenance train.
At 13.5 million tons delivered, the aluminum gondola freight rate
discount equals "REDACTED INFORMATION" per ton through 1999 and "REDACTED
INFORMATION" per ton thereafter. Discounts are in August 1994 dollars and
escalated in the same manner as the freight rates are escalated. The
discounts are volume related and are guaranteed. The discount would be
less for lower annual tonnage. These price reductions are verified in a
letter agreement dated October 28, 1994, between Entergy Services, Inc.
(ESI) and the Railroads.
New aluminum gondola purchase price is assumed to be $51,000/car
verified by price quotations from three manufacturers. Price and
production schedules for each bidder are found in Schedule 1. ESI, on
behalf of AP&L, has executed a Letter of Intent with the lowest bidder
subject to favorable ruling by APSC.
Financing for the new aluminum gondolas is assumed to be leases at
annual lease payment factors equal to 9.4% of original purchase price for
acquisition in 1995. The payment factors increase to 9.6% for acquisition
at end of steel leases. These rates were provided by ESI Corporate
Finance Department as representative leasing rates for a nominal 20 year
lease. It is also assumed that gondolas can be provided at this cost
throughout the remaining operating life of each coal unit by the
acquisition at end of their leases at no greater value than that which
would equate to the same annual payment cost.
The existing steel gondola lease payment for all four leases is
approximately $8.6 million per year. No revenues are assumed from
subleasing, sales, or exchanges, to offset continuing steel gondola lease
payments. This is a conservative approach because it is believed that
there is reasonable likelihood of subleasing or selling at least a portion
of the steel gondola fleet.
Delivery of all 2,289 aluminum gondolas will be completed during the
year 1995 (refer to Schedule 1 for price and production scheduling
information regarding new aluminum gondolas) .
It is assumed that new gondolas will have a six-year period in which
maintenance costs will increase from minimal costs to the typical level of
annual maintenance cost.
With the exception of the six-year maintenance cost build-up for new
gondolas, steel gondola and aluminum gondola maintenance cost is assumed
to be equal. Higher loaded steel gondolas and 120 ton aluminum gondolas
are subject to greater stress of component parts particularly truck parts.
Gondola truck parts include wheels, axles, roller bearings, and the steel
castings to hold the wheels, axles and gondola body together. Maintenance
costs on trucks represent 60% of the total maintenance cost. According to
the white paper titled A Preliminary Assessment of the Effects on Freight
Cars of Loading to a Gross Rail Load of 286,000 Pounds published by the
Association of American Railroads revised February 10, 1992, truck
maintenance costs could increase as much as 50% for gondolas loaded to a
gross rail load of 286,000 pounds instead of 263,000 pounds. Applying a
50% increase in costs on 60% of the maintenance cost equates to a 30%
maintenance increase over gondolas loaded to a gross rail load of 263,000
pounds. Maintenance cost for higher loaded gondolas are based, therefore,
on 1.3 times the 1992 actual maintenance cost incurred (approximately $5
million).
These and other cost estimates contained in this report are found in
Schedule 2.
Escalation
Price adjustments are based on nationally recognized indices as forecasted
by the WEFA Group Spring 1993 forecast.
Private shop labor is adjusted by 50% of the change in Implicit Price
Deflator, Gross Domestic Product (PDIGOP) and 50% of the change in Average
Hourly Earnings - Transportation (WRHP37) - refer to Schedule 3. Railroad
labor is adjusted by the change in Average Hourly Earnings - Railroads
(WRHP4011-U) - refer to Schedule 4. Material cost supplied either by
contract shop or railroad is adjusted by changes in Producer Price Index,
Metals and Metal Products (PPIMMP) - refer to Schedule 5. Total
maintenance costs are split between contract labor, railroad labor and
material cost based on 1992 actual billing.
Lease rates do not escalate. The rent factor is set at time of closing
and is applied to the equipment cost at time of purchase. Financial
Services provided two rent factors. One rent factor is represented as
near term market rates. The other rent factor is represented as projected
market rates when the steel gondola leases expire.
Freight rates are escalated in accordance with contractual obligations
contained in the transportation agreements between the Railroads and AP&L.
The agreements contain a confidentiality clause that restricts disclosure
of contractual terms.
The price of gondolas is escalated from the 1994 base price by the change
in the Producer Price Index - Railroad Equipment index (P144) (refer to
Schedule 6) until year of purchase. The analysis includes three periods
when aluminum gondolas are purchased. The Aluminum Gondola Case assumes
the purchase of 2,289 gondolas in the year 1995. The Base Case assumes
the purchase of 345 aluminum gondolas in the year 1996 and 1,944
additional gondolas as the steel gondola leases expire.
Results
The results of this report are found in Schedules 7-9. Schedule 7 is the
annual cash flow estimate for the Base Case. This cash flow projection
includes estimates of total lease payments, maintenance costs and freight
costs for the base Case. Schedule 8 is the annual cash flow estimate for
the Aluminum Gondola Case. This cash flow projection also includes
estimates of total lease payments, maintenance costs and freight costs
for the Aluminum Gondola Case. The estimated cash flow presented in
Schedule 8 assumes no subleasing or sales income to offset a portion of
the steel gondola lease payments. Included in the estimates for total
lease payments is an estimated expense for parking the steel gondolas.
Schedule 9 contains three summary cash flows for comparison of the Base
Case to the Aluminum Gondola Case. The change is found only in Lease
Payments (line 19), Total (line 24), Cost Difference (line 26), and NPV of
Cost Difference (line 28). This change is also found in the NPV Tables
under Lease Payments (line 37) and Total (line 40). These three summary
cash flows are defined as follows:
Schedule 9-A - Aluminum Gondola Case assumes no subleasing, sales or
exchanges.
Schedule 9-B - Aluminum Gondola Case assumes income from subleasing, sales
or exchanges to offset 50% of the steel lease payments.
Schedule 9-C - Aluminum Gondola Case assumes income from subleasing, sales
or exchanges to affect 100% of the steel lease payments.
Schedule 7, Base Cash Flow
Schedule 7, lines 5 through 8 show lease payments for the steel gondola
leases. Line 9 sums these payments to $8.6 million when all four leases
are active. The first lease expires on July 1, 1998 with the last payment
date. The second lease expires on January 1, 1999 with its last payment
date. The third lease expires on September 1, 2000 with its last payment
date. The final lease expires on September 1, 2002 with its last payment
date. Line 12 shows total rent payment for temporary leased gondolas.
These temporary gondolas are leased to increase the fleet transportation
capacity to the anticipated annual delivery. A two-year lease was signed
with Herzog for 180 gondolas priced at $425/month per gondola plus actual
wheel maintenance costs. A second two-year lease was signed with GE
Leasing for $475/month plus 1.5 cents per mile maintenance charge. A
third lease for three years was signed with D. J. Joseph for $299/ month
plus actual maintenance costs. Line 13 shows aluminum gondolas purchased
in 1996 to replace the steel 544 steel gondolas. New aluminum gondolas
are leased to replace steel gondolas whose lease has expired. The total
number of aluminum gondolas needed to deliver 13.5 million tons per year
is 2,289. 345 aluminum gondolas are leased in 1996 in the Base Case so
that only 1,944 aluminum gondolas are required as steel gondola leases
expire. Lease payments for these aluminum gondolas are show in Schedule 7
line 18,19 and 20. The total lease payments included in the Base Case are
in Schedule 7 line 24.
Similar to lease payment treatment, maintenance cost estimates are
separate for each group of gondolas. Maintenance cost estimates for the
existing steel gondolas are shown in lines 35, 36, 37 and 38 with a sum of
total maintenance of the existing steel gondolas in line 39 of Schedule 7.
Maintenance costs resulting from fleet expansion are shown in lines 42,
43, 44 and 45. Line 42 is the maintenance cost estimate for the Herzog
lease, line 43 is the maintenance estimate for the D. J. Joseph lease,
line 44 is the maintenance estimate for the GE lease and line 45 is the
maintenance estimate for the new aluminum gondolas acquired in 1996. Line
46 of Schedule 7 is the sum of maintenance costs resulting from fleet
expansion. The maintenance cost estimates for three lots of new aluminum
gondolas acquired at the termination of steel leases are shown in lines
49, 50 and 51. Line 53 is the sum of maintenance cost estimates for the
replacement aluminum gondolas. Total maintenance cost estimates included
in the Base Case are shown in line 55. Annual volume of coal moved by
rail is in Schedule 7 line 59. When the annual volume moved is multiplied
by the appropriate per ton rate, the total freight cost is determined.
The freight rate for the first "REDACTED INFORMATION" million tons in
steel gondolas is shown in line 60. The freight rate applicable to annual
tons above "REDACTED INFORMATION" million moved in steel gondolas is shown
in line 61. Lines 62, 63 and 64 are freight rates for annual tons moved
in aluminum gondolas. Line 62 is the freight rate for annual tons moves
less than "REDACTED INFORMATION" million tons. The freight rate in line
63 applies to annual tons less than "REDACTED INFORMATION" million, but
greater than "REDACTED INFORMATION" million tons. The freight rate in
line 64 applies to all tons moved above "REDACTED INFORMATION" million per
year. The total freight cost is estimated in line 65 and is based on a
ratio of steel and aluminum freight rates equal to the percentage of steel
or aluminum gondolas in use for a particular year. The total cost for the
Base Case is estimated in line 66 and is the sum of lines 24, 55 and 65.
Line 66 accounts for total delivered cost of coal less the actual cost
paid for the coal commodity for the Base Case.
Schedule 8 - Aluminum Gondola Case Cash Flow
Schedule 8 is developed similar to Schedule 7. Lines 4, 5, 6 and 7 show
lease payments for the steel gondola leases. Line 8 sums these payments
to $8.6 million. These lease payment lines change when different
assumptions of subleasing, sales or exchange income is made. For no
offsetting income assumptions, the payments are as shown. For the 50%
offsetting income assumption, the lease payments are reduced by 50%
beginning in 1996. For the 100% offsetting income assumptions, the lease
payments are reduced by 100% beginning in 1996. Line 11 contains the
total rent payment for temporary leased gondolas. Line 12 shows a storage
or parking costs for all steel gondolas under AP&L's control. This cost
is calculated based on $1.25 per gondola per day parked. In 1995, the
existing 2,225 steel fleet plus 544 temporary expansion fleet is parked
for one half year. In 1996, the existing 2,225 steel fleet plus 114
temporary expansion fleet is parked for 1 year. After 1996, only those
steel gondolas still under lease are parked for the year. The cost
estimates for parking contained in line 12 change when different
assumptions of subleasing, sales or exchange income are made. For the no
offsetting income assumption, the costs are as shown. For both the 50%
and 100% offsetting income assumption, the parking cost is zero (all
gondolas subleased at 50% or 100% lease payment rates). Line 14 sums the
fleet expansion rent payments and parking costs. Line 17 and 18 show
lease payment estimates for the new aluminum gondola fleet. Line 19 shows
the total estimate lease payment for the aluminum gondola fleet. Line 21
shows the total cost of lease payments for the Aluminum Gondola Case and
is the sum of lines 8, 14 and 19.
Maintenance cost estimates for the existing steel fleet are shown in lines
32, 33, 34 and 35. Line 36 shows the sum of maintenance cost estimates
for the existing steel fleet. Maintenance costs for only 1995 are shown
because the gondolas are assumed parked or subleased beginning in 1996.
Maintenance cost estimates for the temporary fleet expansion gondolas are
shown in lines 39, 40 and 41. The maintenance cost estimate for total
temporary fleet expansion is shown in line 43. Maintenance costs for only
1995 are shown because these gondolas are either returned after lease
expiration or parked. Lines 46 and 47 show the estimated cost of
maintenance for the aluminum gondolas acquired in 1995. Line 48 shows the
total maintenance cost estimate for the aluminum gondolas. Line 50 shows
the total maintenance cost estimate for the Aluminum Gondola Case and is
the sum of lines 36, 43 and 48.
Annual volume of coal moved by rail is shown in line 53. When the annual
volume moved is multiplied by the appropriate per ton rate, the total
freight cost is determined. The freight rate for the first annual
"REDACTED INFORMATION" million tons moved in steel gondolas is shown in
line 54. The freight rate applicable to annual tons above "REDACTED
INFORMATION" million moved in steel gondolas is shown in line 55. Lines
56, 57 and 58 are freight rates for annual tons moved in aluminum
gondolas. Line 56 shows the freight rate for annual tons moved less than
"REDACTED INFORMATION" million tons. Line 57 shows the freight rate which
applies to tons moved in aluminum gondolas above an annual "REDACTED
INFORMATION" but less than "REDACTED INFORMATION" million tons. Line 58
shows the freight rate which applies to tons moved in aluminum gondolas
above an annual "REDACTED INFORMATION" million tons. The total freight
cost is estimated in line 59 and is based on 100% of aluminum gondola
rates after 1995. A ratio of steel and aluminum freight rates equal to
the percentage of steel or aluminum gondolas in use in 1995 is used for
total freight costs in 1995. The total cost for the Aluminum Gondola Case
is estimated in line 60 and is the sum of lines 21, 50 and 59. Line 62
shows the annual cash flow difference from the Base Case line 66 minus the
Aluminum Gondola Case line 60. Positive annual differences in line 62
means that the Aluminum Gondola Case total cost for that particular year
is less than the Base Case total cost.
Schedules 9-A, 9-B and 9-C - Summary Cash Flows
Schedules 9-A, 9-B and 9-C present summary cash flows for lease payments,
maintenance and freight cost estimates for the Base Case and Aluminum
Gondola Case. Schedule 9-A is the cash flow summary under the assumption
that no subleasing, sales or exchange income is available to offset the
steel gondola lease payments. Schedules 9-B and 9-C assume subleasing,
sales or exchange income is available to offset 50% and 100% of the steel
gondola lease payments, respectively. As a result, the values in lines
19, 24, 26, 28, 37 and 40 change per the changes stated in Schedule 8
discussions above. With this exception, line definition and content
remain the same for Schedules 9-A, 9-B and 9-C.
Line 6 shows the net lease payments for the Base Case from line 24 of
Schedule 7. Line 8 shows the net maintenance cost estimate for the Base
Case from line 55 of Schedule 7. Line 10 shows the net freight costs for
the Base Case from line 65 of Schedule 7. Line 11 is the sum of lines 6,
8 and 10. Line 11 represents the total cost for the Base Case.
Line 19 shows the net lease payments for the Aluminum Gondola Case from
line 21 of Schedule 8. Line 21 shows the net maintenance cost estimates
for the Aluminum Gondola Case from line 50 of Schedule 8. Line 23 shows
the net freight costs for the Aluminum Gondola Case for line 59 of
Schedule 8. Line 24 is the sum of lines 19, 21 and 23. Line 24
represents the total cost for the Aluminum Gondola Case.
Line 26 is the annual difference in total costs for the Base Case minus
the Aluminum Gondola Case. It is significant to note that all values as
seen in line 26 are positive differences. Therefore, each and every year
there is an estimated savings associated with fleet change-out to aluminum
gondolas in 1995. Line 28 is the net present value (1995 dollars) for
each annual difference in total costs (line 26). Line 30 is the discount
rate used in this report for all net present value calculations. This
discount factor is the weighted average embedded cost of capital for AP&L.
Lines 37, 38, 39 and 40 contain net present value tables for 10 year
horizon and project-life horizon. Line 37 on page 1 presents the net
present value of lease payments for the Base Case (line 6), the Aluminum
Gondola Case (line 19), and the difference between the Base Case and
Aluminum Gondola Case for the initial ten years and for the project life.
Line 38 on page 1 presents the net present value of maintenance for the
Base Case (line 8), the Aluminum Gondola Case (line 21), and the
difference between the Base Case and Aluminum Gondola Case for the initial
ten years and for the project life. Line 39 on page 1 present the net
present value of the freight cost for the Base Case (line 10), the
Aluminum Gondola Case (line 23), and the difference between the Base Case
and the Aluminum Gondola Case for the initial ten years and for the
project life. Line 40 on page 1 is the net sum of lines 37, 38 and 39.
Schedule 10 - Savings attributed to AP&L's retail customers
For lines 1-40, Schedule 10 is identical to Schedule 9-A. Line
descriptions contained in Schedule 9 discussions above are applicable to
Schedule 10 lines 1-40.
Line 43 represents the amount of coal consumed on behalf of AP&L's Net
Area Requirements. These annual tons are estimated by the following
method.
For the years 1995-2012, annual coal energy estimates (MWh) retained to
satisfy AP&L's Net Area Requirements is divided by total coal energy
estimates (MWh) from White Bluff and ISES. This ratio is then multiplied
by the annual total coal consumed to determine the amount of coal consumed
on behalf of AP&L's retail customers. The source for energy and coal
projections used above is PROMOD results LC 215-216. This PROMOD result
is the PROMOD results used in the Least Cost Resource Plan filed with this
Commission on December 1, 1992. For the years 2013-2030, the effective
annual growth between the years 2008-2012 in tons consumed on behalf of
AP&L's retail customers (2.586%) is used to project tons consumed by
multiplying the previous year consumption by 1.02586. For the years 2031-
2033, the percent of AP&L ownership in ISES is multiplied by the total
tons projected to be consumed in line 59 of Schedule 7.
Line 45 of Page 1 is AP&L's retail customer ratio equal to 88.59%. Line
47 is the tons consumed on behalf of AP&L's retail customers and is equal
to the tons consumed on behalf of AP&L's Net Area Requirements (Line 43)
times AP&L's retail customer ratio (Line 45 of Page 1). Line 49 is the
percentage that results from dividing line 47 by Line 59 of Schedule 7.
This percentage is assumed to represent the proportional percentage of
total savings that are attributed to AP&L's retail customers. The annual
savings attributed to AP&L's retail customers as shown on Line 52 is equal
to the percent of total coal consumed for retail customers (Line 49)
multiplied by Line 26. Line 54 on Page 1 presents the first 10 years net
present value of Line 52. Line 56 on Page 1 presents the net present
value of all savings contained in line 52.
Schedule 11 - Sensitivity Analysis
Schedule 11 is a graphic depiction of the results from a sensitivity
analysis performed on this study. The X axis is net present value
difference. The Y axis is the variables whose sensitivity is measured.
The $0 net present value difference is representative of the life-of-
project net present value of $95.1 million assuming no sublease income.
The range in net present values for each variable is determined by
substituting the low value then the high value of that variable while
keeping all other variables at their nominal value and determining the
change in life-of-project net present value.
The following is a listing of the variables and their value range used in
this sensitivity analysis.
Variable Low High
1995 Aluminum Discount Freight Rate "REDACTED" "REDACTED"
Post 1997 Alum. Discount Freight Rate "REDACTED" "REDACTED"
Tons shipped 11.5 million 14.3 million
1995 lease payment rates 7.5% 12.0%
Post 1997 lease payment rates 7.5% 12.0%
Offsetting steel lease payments None 100% offset
Steel maintenance estimate $2,500/year $3,300/year
Aluminum maintenance estimate $2,500/year $3,300/year
Aluminum gondola price $45,000/year $55,000/year
As shown in Schedule 11, the most sensitive variable is the 1995 aluminum
discount freight rate. This variable swings the net present value results
by a total of approximately $308 million. The post 1997 aluminum discount
freight rate variable swings the net present value results by a total of
approximately $97 million. Tons shipped variable swings the net present
value results by a total of approximately $93 million. 1995 lease payment
rate variable swings the net present value results by a total of $54
million. Post 1997 lease payment rates variable swings the net present
value results by a total of $36 million. Offsetting steel lease payment
variable swings the net present value results by a total of $30 million.
Steel gondola maintenance cost per year variable swings the net present
value results by a total of $8 million. Aluminum gondola maintenance cost
per year variable swings the net present value results by a total of $7
million. The final variable, aluminum gondola price, swings the net
present value results by a total of $5 million.
It is significant to note that no single variable swings the net present
value below zero. The lowest value of net present value results is from
the 1995 discount freight rate variable. This variable, despite its
sensitivity, is now one of the most certain variables due to negotiated
freight rates with the Railroads. The low value of the next most
sensitive variable still provides approximately $48 million in net present
value savings.
Conclusion
In summary, the net present value of the savings associated with the
Aluminum Gondola Case for the period 1995-2004 is $44.0 million (Refer to
line 40 of Schedule 9-A). The net present value of the savings for the
project life is $95.1 million (Refer to line 40 of Schedule 9-A). In
addition to the positive net present value savings, there is no annual
cash flow difference that is negative.
This study indicates that very significant coal transportation savings can
be realized if aluminum gondolas are acquired to replace the existing
steel gondolas in 1995. Subleasing any portion of the steel gondola fleet
will only increase these savings. If income from subleasing or sales is
realized to the extent of offsetting 50% of the steel gondola lease
payments, the net present value of the savings increases to $61.0 million
(refer to line 40 of Schedule 9-B) in the first ten years and $112.1
million (refer to line 40 of Schedule 9-B) over life of the project. At
100% recovery of the steel gondola lease payment, the net present value of
the savings would be $74.5 million (refer to line 40 of Schedule 9-C) in
the first ten years and $125.6 million (refer to line 40 of Schedule 9-C)
over the life of the project.
<PAGE>
<TABLE>
<CAPTION>
Substituted tabular data for graphic Schedule 1
Manufacturer's Production Schedule
Description Cumulative Production of Aluminum Railcars
Month Feb-95 Mar-95 Apr-95 May-95 Jun-95 Jul-95 Aug-95 Sep-95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Johnstown Base Bid Production 480 960 1440 1740 2200 2289
Johnstown Alternate Bid Production 480 1440 2289
Trinity Base Bid Production 120 440 760 1080 1400 1720 2040 2289
Trinity Alternate Bid Production 120 440 760 1080 1145
Thrall Base Bid Production 160 320 480 640
</TABLE>
<TABLE>
<CAPTION>
Substituted tabular data for graphic Schedule 1
Manufacturer's Bid Price Escalated per Proposal
Description Cost Per Railcar During Month Of Construction
Month Feb-95 Mar-95 Apr-95 May-95 Jun-95 Jul-95 Aug-95 Sep-95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Johnstown Base Bid Production $50,186 $50,186 $50,186 $50,186 $50,186 $50,186
Johnstown Alternate Bid Production $49,968 $49,968 $49,968
Trinity Base Bid Production $53,092 $53,092 $53,092 $53,092 $53,092 $53,092 $53,092 $53,092
Trinity Alternate Bid Production $53,392 $53,392 $53,392 $53,392 $53,392
Thrall Base Bid Production $51,387 $51,387 $51,387 $51,387
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 2
Page 1 of 1
<S> <C> <C> <C> <C>
1 Aluminum Gondola Analysis Assumptions
2 1993 railcar rebody cost $40,000
3 1993 aluminum railcar price $51,000
4 1993 steel railcar modification cost $10,000
5 Steel railcar annual lease cost
6 Lot 1 per Railcar $3,153
7 Lot 2 per Railcar $4,296
8 Lot 3 per Railcar $4,479
9 Lot 4 per Railcar $3,121
10 Steel Railcar Purchase Price
11 Lot 1 Remaining cost $22,478,090
12 Lot 2 Remaining cost $32,517,221
13 Lot 3 Remaining cost $20,537,554
14 Lot 4 Remaining cost $9,799,112
15 Steel Railcar Lease Lot size
16 Lot 1 Remaining 592 600 Originally purchased
17 Lot 2 Remaining 744 750 Originally purchased
18 Lot 3 Remaining 574 580 Originally purchased
19 Lot 4 Remaining 315 320 Originally purchased
20 No. of steel railcars required for 13.5 million 2530 2250 Total number
21 No. of modified railcars required for 13.5 million 2409
22 No. of aluminum railcars required for 13.5 million 2289
23 0
24 steel railcar maintenance per railcar $2,246
25 Modified steel railcar maintenance $2,920
26 First year aluminum car maintenance $204
27 Second year aluminum car maintenance $407
28 Third year aluminum car maintenance $815
29 Fourth year aluminum car maintenance $2,037
30 Fifth year aluminum car maintenance $2,037
31 Sixth year aluminum car maintenance $2,377
32 After six years aluminum car maintenance $2,920
33
34 % maintenance private labor 77.61%
35 % maintenance private material 6.12%
36 % maintenance railroad labor 5.15%
37 % maintenance railroad material 11.13%
38 Steel Railcar Rate 8.5 MM "REDACTED"
39 Steel Railcar incentive rate "REDACTED"
40 Aluminum Rate 8.5 MM tons after leases expire "REDACTED" "REDACTED"
41 Aluminum Rate 8.5-10.0 MM tons after leases expire "REDACTED" "REDACTED" "REDACTED INFORMATION"
42 Aluminum Rate above 10.0 MM tons after leases expire "REDACTED" "REDACTED" "REDACTED INFORMATION"
43 Aluminum Rate 8.5 MM tons effective 1995 "REDACTED" "REDACTED" "REDACTED INFORMATION"
44 Aluminum Rate 8.5-10.0 MM tons effective 1995 "REDACTED" "REDACTED"
45 Aluminum Rate above 10.0 MM tons effective 1995 "REDACTED" "REDACTED"
46 Heavy loaded Rate "REDACTED"
47 Heavy Loaded Incentive rate "REDACTED"
48 New Equipment Lease Rental Rates now 9.40%
49 New Equipment Lease Rental Rates Later 9.60%
50 Used Equipment Lease Rental Rates now 10.80%
</TABLE>
<PAGE>
Schedule 3
Page 1 of 1
1 Creation of Escalator - (Trend) Watco
2 YEAR PCH(PDIGDP) PCH(WRHP37) WEIGHTED
3 50% 50% ESCALATOR
4 1991 4.042% 4.653% 1.044
5 1992 2.632% 2.880% 1.028
6 1993 2.730% 3.562% 1.032
7 1994 3.216% 4.104% 1.037
8 1995 3.336% 4.467% 1.040
9 1996 3.499% 4.341% 1.040
10 1997 3.338% 4.167% 1.038
11 1998 3.127% 4.244% 1.038
12 1999 3.249% 4.376% 1.039
13 2000 3.322% 4.443% 1.040
14 2001 3.304% 4.459% 1.040
15 2002 3.352% 4.582% 1.041
16 2003 3.461% 4.681% 1.042
17 2004 3.412% 4.828% 1.042
18 2005 3.395% 4.961% 1.043
19 2006 3.463% 5.066% 1.044
20 2007 3.588% 5.088% 1.045
21 2008 3.691% 5.094% 1.045
22 2009 3.787% 5.127% 1.046
23 2010 3.841% 5.155% 1.046
24 2011 3.812% 5.179% 1.046
25 2012 3.784% 5.194% 1.046
26 2013 3.774% 5.208% 1.046
27 2014 3.797% 5.218% 1.046
28 2015 3.830% 5.206% 1.046
29 2016 3.835% 5.237% 1.046
30 2017 3.804% 5.213% 1.046
31 2018 3.804% 5.213% 1.046
32 2019 3.804% 5.213% 1.046
33 2020 3.804% 5.213% 1.046
34 2021 3.804% 5.213% 1.046
35 2022 3.804% 5.213% 1.046
36 2023 3.804% 5.213% 1.046
37 2024 3.804% 5.213% 1.046
38 2025 3.804% 5.213% 1.046
39 2026 3.804% 5.213% 1.046
40 2027 3.804% 5.213% 1.046
41 2028 3.804% 5.213% 1.046
42 2029 3.804% 5.213% 1.046
43 2030 3.804% 5.213% 1.046
44 2031 3.804% 5.213% 1.046
45 2032 3.804% 5.213% 1.046
46 2033 3.804% 5.213% 1.046
47 2034 3.804% 5.213% 1.046
48 2035 3.804% 5.213% 1.046
49 2036 3.804% 5.213% 1.046
50 2037 3.804% 5.213% 1.046
51 2038 3.804% 5.213% 1.046
52 Source: WEFA's Spring 1993 Trend Forecast
<PAGE>
Schedule 4
Page 1 of 1
1 Wage Rate Escalator - Railroad (wwrhp4011_u)
2 YEAR ESCALATOR (TREND) HIGH LOW
3 1991 0.9753 0.09753 0.0975
4 1992 1.0626 1.0626 1.0626
5 1993 1.0305 1.0305 1.0305
6 1994 1.0259 1.0259 1.0259
7 1995 1.0232 1.0232 1.0234
8 1996 1.0421 1.0421 1.0423
9 1997 1.0397 1.0396 1.0396
10 1998 1.0389 1.0386 1.0389
11 1999 1.0392 1.0390 1.0391
12 2000 1.0392 1.0389 1.0393
13 2001 1.0393 1.0390 1.0395
14 2002 1.0385 1.0382 1.0381
15 2003 1.0382 1.0379 1.0380
16 2004 1.0387 1.0384 1.0388
17 2005 1.0384 1.0382 1.0385
18 2006 1.0384 1.0382 1.0384
19 2007 1.0385 1.0383 1.0385
20 2008 1.0385 1.0384 1.0385
21 2009 1.0385 1.0385 1.0385
22 2010 1.0385 1.0384 1.0386
23 2011 1.0385 1.0384 1.0385
24 2012 1.0385 1.0385 1.0386
25 2013 1.0385 1.0386 1.0386
26 2014 1.0385 1.0386 1.0384
27 2015 1.0385 1.0386 1.0384
28 2016 1.0385 1.0386 1.0385
29 2017 1.0385 1.0386 1.0385
30 2018 1.0385 1.0386 1.0385
31 2019 1.0385 1.0386 1.0385
32 2020 1.0385 1.0386 1.0385
33 2021 1.0385 1.0386 1.0385
34 2022 1.0385 1.0386 1.0385
35 2023 1.0385 1.0386 1.0385
36 2024 1.0385 1.0386 1.0385
37 2025 1.0385 1.0386 1.0385
38 2026 1.0385 1.0386 1.0385
39 2027 1.0385 1.0386 1.0385
40 2028 1.0385 1.0386 1.0385
41 2029 1.0385 1.0386 1.0385
42 2030 1.0385 1.0386 1.0385
43 2031 1.0385 1.0386 1.0385
44 2032 1.0385 1.0386 1.0385
45 2033 1.0385 1.0386 1.0385
46 2034 1.0385 1.0386 1.0385
47 2035 1.0385 1.0386 1.0385
48 2036 1.0385 1.0386 1.0385
49 2037 1.0385 1.0386 1.0385
50 2038 1.0385 1.0386 1.0385
51 Bands were formulated From the bands for WRHPTPU
52 Where: WRHPTPU = Avg Hourly Earning, Transportation & Public
<PAGE>
<TABLE>
Schedule 5
Page 1 of 1
<CAPTION>
1 Comparison of Selected Indices to determine the proper escalator for materials
2 PCH PCH PCH PCH PCH PCH
3 YEAR PPIMMP (PPIMMP) P10 (P10) P101 (P101) P101507 (P101507) P1017 (P1017) P1081 (P1081)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 1980 94.958 94.967 90.017 86.592 91.283
5 1981 99.575 4.862% 99.592 4.870% 98.467 9.387% 96.592 11.548% 97.225 6.509%
6 1982 99.969 0.396% 99.992 0.402% 100.000 1.557% 100.000 100.000 3.528% 100.017 2.872%
7 1983 101.833 1.865% 101.850 1.858% 101.300 1.300% 100.317 0.317% 100.925 0.925% 99.283 -0.734%
8 1984 104.780 2.894% 104.792 2.889% 105.275 3.924% 103.350 3.023% 104.717 3.757% 102.083 2.820%
9 1985 104.386 -0.376% 104.392 -0.382% 104.800 -0.451% 103.175 -0.169% 104.742 0.024% 102.858 0.759%
10 1986 103.178 -1.157% 103.167 -1.173% 101.158 -3.475% 102.925 -0.242% 99.750 -4.766% 102.525 -0.324%
11 1987 107.099 3.800% 107.125 3.836% 104.567 3.370% 103.208 0.275% 102.317 2.573% 103.225 0.683%
12 1988 118.684 10.81% 118.683 10.789% 115.675 10.623% 104.967 1.704% 110.708 8.201% 106.533 3.205%
13 1989 124.093 4.557% 124.075 4.543% 119.075 2.939% 109.833 4.636% 114.517 3.441% 112.150 5.273%
14 1990 122.944 -0.926% 122.925 -0.927% 117.217 -1.560% 112.917 2.808% 112.142 -2.074% 116.250 3.656%
15 1991 120.251 -2.190% 120.233 -2.190% 114.075 -2.680% 117.133 3.734% 109.475 -2.378% 118.358 1.813%
16 1992 119.227 -0.852% 119.208 -0.853% 111.450 -2.301% 118.350 1.039% 106.375 -2.832% 118.725 0.310%
17 1993 118.760 -0.392% 119.163 -0.038% 114.315 2.571% 124.025 4.795% 107.967 1.497% 120.211 1.252%
18 1994 120.315 1.309% 121.642 2.080% 118.162 3.365% 128.187 3.356% 112.050 3.782% 124.780 3.801%
19 1995 123.302 2.483% 124.988 2.751% 121.854 3.125% 132.418 3.301% 115.860 3.400% 129.521 3.799%
20 1996 127.590 3.478% 128.375 2.710% 125.260 2.795% 136.125 2.799% 119.104 2.800% 133.381 2.980%
21 1997 132.619 3.942% 132.075 2.882% 128.861 2.875% 139.937 2.800% 122.558 2.900% 136.976 2.695%
22 1998 137.492 3.674% 135.959 2.941% 132.732 3.004% 144.275 3.100% 126.234 2.999% 141.080 2.996%
23 1999 142.449 3.605% 140.011 2.980% 136.746 3.024% 148.892 3.200% 130.022 3.001% 145.379 3.047%
24 2000 147.556 3.585% 144.228 3.012% 140.978 3.095% 153.656 3.200% 134.052 3.099% 149.954 3.147%
25 2001 152.754 3.523% 148.575 3.014% 145.345 3.098% 158.573 3.200% 138.342 3.200% 154.657 3.136%
26 2002 158.132 3.521% 152.984 2.968% 149.722 3.011% 163.568 3.150% 142.630 3.100% 159.373 3.049%
27 2003 163.657 3.494%
28 2004 169.510 3.576% 1.192175 1.1145 1.1835 1.06375 1.187048
29 2005 175.608 3.597% 1.283337 1.343401 1.38207 1.340823 1.342371
30 2006 181.948 3.610%
31 2007 188.584 3.647%
32 2008 195.443 3.637%
33 2009 202.590 3.657%
34 2010 210.058 3.686%
35 2011 217.757 3.665%
36 2012 225.672 3.635%
37 2013 233.802 3.603%
38 2014 242.191 3.588%
39 2015 250.915 3.602%
40 2016 259.933 3.594%
</TABLE>
<PAGE>
<TABLE>
Schedule 6
Page 1 of 1
<CAPTION>
1 Comparison of Selected Indices to determine proper escalattion for railcars
2 YEAR PPITEQ PCH(PPITEQ) P14 PCH(P14) P144 PCH(P144) PDIGDP PCH(PDIGDP)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 1980 82.891 82.892 90.358 71.725
4 1981 94.292 13.754% 94.292 13.753% 97.025 7.378% 78.875 9.969%
5 1982 99.990 6.043% 99.992 6.045% 99.975 3.040% 83.750 6.181%
6 1983 102.826 2.836% 102.825 2.833% 101.083 1.108% 87.125 4.030%
7 1984 105.188 2.297% 105.183 2.293% 102.633 1.533% 91.025 4.476%
8 1985 107.929 2.603% 107.925 2.607% 104.867 2.177% 94.350 3.653%
9 1986 110.553 2.434% 110.542 2.425% 105.425 0.532% 96.925 2.729%
10 1987 112.481 1.744% 112.508 1.779% 104.742 -0.648% 99.950 3.121%
11 1988 114.251 1.574% 114.250 1.548% 107.542 2.673% 103.825 3.877%
12 1989 117.712 3.029% 117.692 3.013% 114.008 6.013% 108.550 4.551%
13 1990 121.505 3.222% 121.483 3.221% 118.633 4.057% 113.200 4.284%
14 1991 126.455 4.074% 126.433 4.075% 122.233 3.035% 117.775 4.042%
15 1992 130.464 3.170% 130.425 3.157% 123.658 1.166% 120.875 2.632%
16 1993 133.294 2.169% 133.207 2.133% 124.923 1.023% 124.175 2.730%
17 1994 136.605 2.484% 136.040 2.127% 127.888 2.373% 128.168 3.216%
18 1995 140.739 3.026% 139.849 2.800% 131.341 2.700% 132.444 3.336%
19 1996 145.805 3.600% 144.254 3.150% 135.610 3.250% 137.078 3.499%
20 1997 151.219 3.713% 148.882 3.208% 139.611 2.950% 141.654 3.338%
21 1998 156.797 3.689% 153.734 3.259% 143.582 2.844% 146.084 3.127%
22 1999 162.630 3.720% 158.708 3.235% 147.569 2.777% 150.830 3.249%
23 2000 168.708 3.737% 163.881 3.259% 151.939 2.961% 155.841 3.322%
24 2001 174.900 3.670% 169.200 3.246% 156.409 2.942% 160.990 3.304%
25 2002 181.308 3.664% 174.491 3.127% 161.008 2.940% 166.386 3.352%
26
27 1.30477 1.304354 1.236889 1.4432836
28 1.389717 1.337865 1.302043 1.3765129
29 Where:
30 PPITEQ = PPI, Transportation Equipment
31 P14 = PPI, Transportation Equipment
32 P144 = PPI, Railroad Equipment
33 PDIGDP = Implicit Price Deflator, Gross Domestic Product
34
35 Ppiteq, pdigdp is obtained from Spring 1993 Trend (uacls06)
36 P14 & P144 is from the Spring 1993 Cost Bank (IPLT)
</TABLE>
<PAGE>
Schedule 7
BASE CASE CASH FLOW (1995-2035)
Lease Payment Estimation
<TABLE>
<CAPTION>
Lease # 1 Lease # 2 Lease # 3 Lease # 4
Railcars are Railcars are Railcars are Railcars are Total
Lease returned returned returned third returned third Lease
Payment mid 1998 mid 1999 quarter 2000 quarter 2002 Payment
<S> <C> <C> <C> <C> <C> <C>
7/1/93 9/1/93 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/94 9/1/94 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/95 9/1/95 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/96 9/1/96 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/97 9/1/97 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/98 9/1/98 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/99 9/1/99 $0 $1,598,293 $2,570,738 $982,992 $5,152,023
7/1/00 9/1/00 $0 $0 $2,570,738 $982,992 $3,553,730
7/1/01 9/1/01 $0 $0 $0 $982,992 $982,992
7/1/02 9/1/02 $0 $0 $0 $982,992 $982,992
7/1/03 9/1/03 $0 $0 $0 $0 $0
7/1/04 9/1/04 $0 $0 $0 $0 $0
7/1/05 9/1/05 $0 $0 $0 $0 $0
7/1/06 9/1/06 $0 $0 $0 $0 $0
7/1/07 9/1/07 $0 $0 $0 $0 $0
7/1/08 9/1/08 $0 $0 $0 $0 $0
7/1/09 9/1/09 $0 $0 $0 $0 $0
7/1/10 9/1/10 $0 $0 $0 $0 $0
7/1/11 9/1/11 $0 $0 $0 $0 $0
7/1/12 9/1/12 $0 $0 $0 $0 $0
7/1/13 9/1/13 $0 $0 $0 $0 $0
7/1/14 9/1/14 $0 $0 $0 $0 $0
7/1/15 9/1/15 $0 $0 $0 $0 $0
7/1/16 9/1/16 $0 $0 $0 $0 $0
7/1/17 9/1/17 $0 $0 $0 $0 $0
7/1/18 9/1/18 $0 $0 $0 $0 $0
7/1/19 9/1/19 $0 $0 $0 $0 $0
7/1/20 9/1/20 $0 $0 $0 $0 $0
7/1/21 9/1/21 $0 $0 $0 $0 $0
7/1/22 9/1/22 $0 $0 $0 $0 $0
7/1/23 9/1/23 $0 $0 $0 $0 $0
7/1/24 9/1/24 $0 $0 $0 $0 $0
7/1/25 9/1/25 $0 $0 $0 $0 $0
7/1/26 9/1/26 $0 $0 $0 $0 $0
7/1/27 9/1/27 $0 $0 $0 $0 $0
7/1/28 9/1/28 $0 $0 $0 $0 $0
7/1/29 9/1/29 $0 $0 $0 $0 $0
7/1/30 9/1/30 $0 $0 $0 $0 $0
7/1/31 9/1/31 $0 $0 $0 $0 $0
7/1/32 9/1/32 $0 $0 $0 $0 $0
7/1/33 9/1/33 $0 $0 $0 $0 $0
7/1/34 9/1/34 $0 $0 $0 $0 $0
7/1/35 9/1/35 $0 $0 $0 $0 $0
</TABLE>
<PAGE>
Additional equipment needs
Lease
Trains- Three Total
180@425, trainsets additional
114@299, of Aluminum equipment
and 250@475 Railcars needs
345
7/1/93 9/1/93 $2,752,032 $2,752,032
7/1/94 9/1/94 $2,752,032 $1,753,790 $2,752,032
7/1/95 9/1/95 $409,032 $1,753,790 $2,162,822
7/1/96 9/1/96 $1,753,790 $1,753,790
7/1/97 9/1/97 $1,753,790 $1,753,790
7/1/98 9/1/98 $1,753,790 $1,753,790
7/1/99 9/1/99 $1,753,790 $1,753,790
7/1/00 9/1/00 $1,753,790 $1,753,790
7/1/01 9/1/01 $1,753,790 $1,753,790
7/1/02 9/1/02 $1,753,790 $1,753,790
7/1/03 9/1/03 $1,753,790 $1,753,790
7/1/04 9/1/04 $1,753,790 $1,753,790
7/1/05 9/1/05 $1,753,790 $1,753,790
7/1/06 9/1/06 $1,753,790 $1,753,790
7/1/07 9/1/07 $1,753,790 $1,753,790
7/1/08 9/1/08 $1,753,790 $1,753,790
7/1/09 9/1/09 $1,753,790 $1,753,790
7/1/10 9/1/10 $1,753,790 $1,753,790
7/1/11 9/1/11 $1,753,790 $1,753,790
7/1/12 9/1/12 $1,753,790 $1,753,790
7/1/13 9/1/13 $1,753,790 $1,753,790
7/1/14 9/1/14 $1,753,790 $1,753,790
7/1/15 9/1/15 $1,753,790 $1,753,790
7/1/16 9/1/16 $1,753,790 $1,753,790
7/1/17 9/1/17 $1,753,790 $1,753,790
7/1/18 9/1/18 $1,753,790 $1,753,790
7/1/19 9/1/19 $1,753,790 $1,753,790
7/1/20 9/1/20 $1,753,790 $1,753,790
7/1/21 9/1/21 $1,753,790 $1,753,790
7/1/22 9/1/22 $1,753,790 $1,753,790
7/1/23 9/1/23 $1,753,790 $1,753,790
7/1/24 9/1/24 $1,753,790 $1,753,790
7/1/25 9/1/25 $1,753,790 $1,753,790
7/1/26 9/1/26 $1,753,790 $1,753,790
7/1/27 9/1/27 $1,753,790 $1,753,790
7/1/28 9/1/28 $1,753,790 $1,753,790
7/1/29 9/1/29 $0 $1,753,790
7/1/30 9/1/30 $0 $0
7/1/31 9/1/31 $0
7/1/32 9/1/32 $0
7/1/33 9/1/33 $0
7/1/34 9/1/34 $0
7/1/35 9/1/35
Aluminum Railcar Lease Payments
<PAGE>
<TABLE>
<CAPTION>
Total Higher
Aluminum Capacity/
Railcar Aluminum
Lease Lot 1 Lot 2 Lot 3 Lot 4 Lease Lease
Payment replacement replacement replacement replacement Payments Payments
609 765 570 0 1944
<S> <C> <C> <C> <C> <C> <C> <C>
7/1/93 9/1/93 $0 $0 $0 $0 $0 $8,616,734
7/1/94 9/1/94 $0 $0 $0 $0 $0 $11,368,766
7/1/95 9/1/95 $0 $0 $0 $0 $0 $11,368,766
7/1/96 9/1/96 $0 $0 $0 $0 $0 $10,779,556
7/1/97 9/1/97 $0 $0 $0 $0 $0 $10,370,524
7/1/98 9/1/98 $0 $0 $0 $0 $0 $10,370,524
7/1/99 9/1/99 $3,440,491 $0 $0 $0 $3,440,491 $10,346,304
7/1/00 9/1/00 $3,440,491 $4,449,768 $0 $0 $7,890,259 $13,197,779
7/1/01 9/1/01 $3,440,491 $4,449,768 $0 $0 $7,890,259 $10,627,041
7/1/02 9/1/02 $3,440,491 $4,449,768 $0 $0 $7,890,259 $10,627,041
7/1/03 9/1/03 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/04 9/1/04 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/05 9/1/05 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/06 9/1/06 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/07 9/1/07 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/08 9/1/08 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/09 9/1/09 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/10 9/1/10 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/11 9/1/11 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/12 9/1/12 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/13 9/1/13 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/14 9/1/14 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/15 9/1/15 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/16 9/1/16 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/17 9/1/17 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/18 9/1/18 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/19 9/1/19 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/20 9/1/20 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/21 9/1/21 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/22 9/1/22 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/23 9/1/23 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/24 9/1/24 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/25 9/1/25 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/26 9/1/26 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/27 9/1/27 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/28 9/1/28 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/29 9/1/29 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/30 9/1/30 $3,440,491 $4,449,768 $3,618,339 $0 $11,508,598 $13,262,388
7/1/31 9/1/31 $0 $4,449,768 $3,618,339 $0 $8,068,106 $8,068,106
7/1/32 9/1/32 $0 $4,449,768 $3,618,339 $0 $8,068,106 $8,068,106
7/1/33 9/1/33 $0 $4,449,768 $3,618,339 $0 $8,068,106 $8,068,106
7/1/34 9/1/34 $0 $4,449,768 $3,618,339 $0 $8,068,106 $8,068,106
7/1/35 9/1/35 $0 $4,449,768 $3,618,339 $0 $8,068,106 $8,068,106
</TABLE>
<PAGE>
Maintenance on Higher Loaded Steel
Lot 1 Lot 2 Lot 3 Lot 4
592 744 574 315 2225
7/1/93 9/1/93 $0 $0 $0 $0 $0
7/1/94 9/1/94 $1,784,902 $2,243,187 $1,730,631 $949,737 $6,708,457
7/1/95 9/1/95 $1,850,074 $2,325,093 $1,793,822 $984,414 $6,953,402
7/1/96 9/1/96 $1,922,474 $2,416,083 $1,864,021 $1,022,938 $7,225,516
7/1/97 9/1/97 $1,996,428 $2,509,024 $1,935,726 $1,062,288 $7,503,466
7/1/98 9/1/98 $2,071,569 $2,603,458 $2,008,582 $1,102,271 $7,785,880
7/1/99 9/1/99 $0 $2,703,804 $2,085,999 $1,144,756 $5,934,559
7/1/00 9/1/00 $0 $0 $2,167,462 $1,189,461 $3,356,922
7/1/01 9/1/01 $0 $0 $0 $1,235,811 $1,235,811
7/1/02 9/1/02 $0 $0 $0 $1,284,802 $1,284,802
7/1/03 9/1/03 $0 $0 $0 $0 $0
7/1/04 9/1/04 $0 $0 $0 $0 $0
7/1/05 9/1/05 $0 $0 $0 $0 $0
7/1/06 9/1/06 $0 $0 $0 $0 $0
7/1/07 9/1/07 $0 $0 $0 $0 $0
7/1/08 9/1/08 $0 $0 $0 $0 $0
7/1/09 9/1/09 $0 $0 $0 $0 $0
7/1/10 9/1/10 $0 $0 $0 $0 $0
7/1/11 9/1/11 $0 $0 $0 $0 $0
7/1/12 9/1/12 $0 $0 $0 $0 $0
7/1/13 9/1/13 $0 $0 $0 $0 $0
7/1/14 9/1/14 $0 $0 $0 $0 $0
7/1/15 9/1/15 $0 $0 $0 $0 $0
7/1/16 9/1/16 $0 $0 $0 $0 $0
7/1/17 9/1/17 $0 $0 $0 $0 $0
7/1/18 9/1/18 $0 $0 $0 $0 $0
7/1/19 9/1/19 $0 $0 $0 $0 $0
7/1/20 9/1/20 $0 $0 $0 $0 $0
7/1/21 9/1/21 $0 $0 $0 $0 $0
7/1/22 9/1/22 $0 $0 $0 $0 $0
7/1/23 9/1/23 $0 $0 $0 $0 $0
7/1/24 9/1/24 $0 $0 $0 $0 $0
7/1/25 9/1/25 $0 $0 $0 $0 $0
7/1/26 9/1/26 $0 $0 $0 $0 $0
7/1/27 9/1/27 $0 $0 $0 $0 $0
7/1/28 9/1/28 $0 $0 $0 $0 $0
7/1/29 9/1/29 $0 $0 $0 $0 $0
7/1/30 9/1/30 $0 $0 $0 $0 $0
7/1/31 9/1/31 $0 $0 $0 $0 $0
7/1/32 9/1/32 $0 $0 $0 $0 $0
7/1/33 9/1/33 $0 $0 $0 $0 $0
7/1/34 9/1/34 $0 $0 $0 $0 $0
7/1/35 9/1/35 $0 $0 $0 $0 $0
<PAGE>
Maintenance on Higher Loaded Steel
Lot 1 Lot 2 Lot 3 Lot 4
592 744 574 315 2225
7/1/93 9/1/93 $0 $0 $0 $0 $0
7/1/94 9/1/94 $1,784,902 $2,243,187 $1,730,631 $949,737 $6,708,457
7/1/95 9/1/95 $1,850,074 $2,325,093 $1,793,822 $984,414 $6,953,402
7/1/96 9/1/96 $1,922,474 $2,416,083 $1,864,021 $1,022,938 $7,225,516
7/1/97 9/1/97 $1,996,428 $2,509,024 $1,935,726 $1,062,288 $7,503,466
7/1/98 9/1/98 $2,071,569 $2,603,458 $2,008,582 $1,102,271 $7,785,880
7/1/99 9/1/99 $0 $2,703,804 $2,085,999 $1,144,756 $5,934,559
7/1/00 9/1/00 $0 $0 $2,167,462 $1,189,461 $3,356,922
7/1/01 9/1/01 $0 $0 $0 $1,235,811 $1,235,811
7/1/02 9/1/02 $0 $0 $0 $1,284,802 $1,284,802
7/1/03 9/1/03 $0 $0 $0 $0 $0
7/1/04 9/1/04 $0 $0 $0 $0 $0
7/1/05 9/1/05 $0 $0 $0 $0 $0
7/1/06 9/1/06 $0 $0 $0 $0 $0
7/1/07 9/1/07 $0 $0 $0 $0 $0
7/1/08 9/1/08 $0 $0 $0 $0 $0
7/1/09 9/1/09 $0 $0 $0 $0 $0
7/1/10 9/1/10 $0 $0 $0 $0 $0
7/1/11 9/1/11 $0 $0 $0 $0 $0
7/1/12 9/1/12 $0 $0 $0 $0 $0
7/1/13 9/1/13 $0 $0 $0 $0 $0
7/1/14 9/1/14 $0 $0 $0 $0 $0
7/1/15 9/1/15 $0 $0 $0 $0 $0
7/1/16 9/1/16 $0 $0 $0 $0 $0
7/1/17 9/1/17 $0 $0 $0 $0 $0
7/1/18 9/1/18 $0 $0 $0 $0 $0
7/1/19 9/1/19 $0 $0 $0 $0 $0
7/1/20 9/1/20 $0 $0 $0 $0 $0
7/1/21 9/1/21 $0 $0 $0 $0 $0
7/1/22 9/1/22 $0 $0 $0 $0 $0
7/1/23 9/1/23 $0 $0 $0 $0 $0
7/1/24 9/1/24 $0 $0 $0 $0 $0
7/1/25 9/1/25 $0 $0 $0 $0 $0
7/1/26 9/1/26 $0 $0 $0 $0 $0
7/1/27 9/1/27 $0 $0 $0 $0 $0
7/1/28 9/1/28 $0 $0 $0 $0 $0
7/1/29 9/1/29 $0 $0 $0 $0 $0
7/1/30 9/1/30 $0 $0 $0 $0 $0
7/1/31 9/1/31 $0 $0 $0 $0 $0
7/1/32 9/1/32 $0 $0 $0 $0 $0
7/1/33 9/1/33 $0 $0 $0 $0 $0
7/1/34 9/1/34 $0 $0 $0 $0 $0
7/1/35 9/1/35 $0 $0 $0 $0 $0
<PAGE>
<TABLE>
<CAPTION>
Maintenance on additional equipment
Aluminum
Herzog lease Other lease GE lease Railcars
180 114 250 345
<S> <C> <C> <C> <C> <C>
7/1/93 9/1/93 $189,000 $319,200 $525,000 $0
7/1/94 9/1/94 $189,000 $319,200 $525,000 $1,033,200
7/1/95 9/1/95 $319,200 $78,166 $1,033,200
7/1/96 9/1/96 $162,345 $397,366
7/1/97 9/1/97 $336,911 $162,345
7/1/98 9/1/98 $874,741 $336,911
7/1/99 9/1/99 $908,901 $874,741
7/1/00 9/1/00 $1,101,705 $908,901
7/1/01 9/1/01 $1,407,182 $1,101,705
7/1/02 9/1/02 $1,464,034 $1,407,182
7/1/03 9/1/03 $1,524,164 $1,464,034
7/1/04 9/1/04 $1,587,648 $1,524,164
7/1/05 9/1/05 $1,654,942 $1,587,648
7/1/06 9/1/06 $1,726,056 $1,654,942
7/1/07 9/1/07 $1,800,849 $1,726,056
7/1/08 9/1/08 $1,879,807 $1,800,849
7/1/09 9/1/09 $1,962,917 $1,879,807
7/1/10 9/1/10 $2,049,689 $1,962,917
7/1/11 9/1/11 $2,140,173 $2,049,689
7/1/12 9/1/12 $2,234,643 $2,140,173
7/1/13 9/1/13 $2,333,539 $2,234,643
7/1/14 9/1/14 $2,437,025 $2,333,539
7/1/15 9/1/15 $2,545,498 $2,437,025
7/1/16 9/1/16 $2,658,321 $2,545,498
7/1/17 9/1/17 $2,776,166 $2,658,321
7/1/18 9/1/18 $2,899,275 $2,776,166
7/1/19 9/1/19 $3,027,883 $2,899,275
7/1/20 9/1/20 $3,162,239 $3,027,883
7/1/21 9/1/21 $3,302,600 $3,162,239
7/1/22 9/1/22 $3,449,237 $3,302,600
7/1/23 9/1/23 $3,602,432 $3,449,237
7/1/24 9/1/24 $3,762,480 $3,602,432
7/1/25 9/1/25 $3,929,690 $3,762,480
7/1/26 9/1/26 $4,104,384 $3,929,690
7/1/27 9/1/27 $4,286,898 $4,104,384
7/1/28 9/1/28 $4,477,586 $4,286,898
7/1/29 9/1/29 $4,676,815 $4,477,586
7/1/30 9/1/30 $0 $4,676,815
7/1/31 9/1/31 $0 $0
7/1/32 9/1/32 $0 $0
7/1/33 9/1/33 $0 $0
7/1/34 9/1/34 $0 $0
7/1/35 9/1/35 $0
</TABLE>
<PAGE>
Maintenance on Aluminum Railcars
<TABLE>
<CAPTION>
Lot 1 Lot 2 Lot 3 Lot 4 Higher Capacity
609 765 570 0 1944 Maintenance Cost
<S> <C> <C> <C> <C> <C> <C> <C>
7/1/93 9/1/93 $0 $0 $0 $0 $0 $4,997,754
7/1/94 9/1/94 $0 $0 $0 $0 $0 $7,741,657
7/1/95 9/1/95 $0 $0 $0 $0 $0 $7,986,602
7/1/96 9/1/96 $0 $0 $0 $0 $0 $7,622,882
7/1/97 9/1/97 $0 $0 $0 $0 $0 $7,665,811
7/1/98 9/1/98 $0 $0 $0 $0 $0 $8,122,790
7/1/99 9/1/99 $154,411 $0 $0 $0 $154,411 $6,963,710
7/1/00 9/1/00 $320,882 $201,539 $0 $0 $522,421 $4,788,244
7/1/01 9/1/01 $666,771 $418,785 $0 $0 $1,085,556 $3,423,072
7/1/02 9/1/02 $1,733,011 $870,774 $0 $0 $2,603,784 $5,295,769
7/1/03 9/1/03 $1,803,026 $2,264,885 $168,756 $0 $4,236,668 $5,700,701
7/1/04 9/1/04 $2,189,926 $2,357,907 $351,374 $0 $4,899,207 $6,423,371
7/1/05 9/1/05 $2,802,543 $2,865,471 $732,020 $0 $6,400,034 $7,987,681
7/1/06 9/1/06 $2,921,332 $3,669,654 $1,811,887 $0 $8,402,873 $10,057,815
7/1/07 9/1/07 $3,046,865 $3,827,343 $1,989,590 $0 $8,863,797 $10,589,854
7/1/08 9/1/08 $3,178,890 $3,993,187 $2,421,768 $0 $9,593,845 $11,394,694
7/1/09 9/1/09 $3,318,268 $4,168,268 $3,105,768 $0 $10,592,305 $12,472,112
7/1/10 9/1/10 $3,464,975 $4,352,554 $3,243,080 $0 $11,060,609 $13,023,525
7/1/11 9/1/11 $3,618,147 $4,544,963 $3,386,443 $0 $11,549,554 $13,599,243
7/1/12 9/1/12 $3,777,870 $4,745,601 $3,535,938 $0 $12,059,409 $14,199,582
7/1/13 9/1/13 $3,944,631 $4,955,078 $3,692,019 $0 $12,591,728 $14,826,371
7/1/14 9/1/14 $4,119,204 $5,174,369 $3,855,412 $0 $13,148,985 $15,482,524
7/1/15 9/1/15 $4,301,878 $5,403,837 $4,026,389 $0 $13,732,104 $16,169,129
7/1/16 9/1/16 $4,493,357 $5,644,365 $4,205,605 $0 $14,343,327 $16,888,825
7/1/17 9/1/17 $4,692,515 $5,894,539 $4,392,009 $0 $14,979,063 $17,637,384
7/1/18 9/1/18 $4,900,537 $6,155,847 $4,586,710 $0 $15,643,095 $18,419,261
7/1/19 9/1/19 $5,117,851 $6,428,827 $4,790,107 $0 $16,336,784 $19,236,059
7/1/20 9/1/20 $5,344,872 $6,714,002 $5,002,590 $0 $17,061,465 $20,089,348
7/1/21 9/1/21 $5,582,039 $7,011,921 $5,224,569 $0 $17,818,530 $20,980,769
7/1/22 9/1/22 $5,829,807 $7,323,157 $5,456,470 $0 $18,609,435 $21,912,035
7/1/23 9/1/23 $6,088,654 $7,648,309 $5,698,740 $0 $19,435,702 $22,884,939
7/1/24 9/1/24 $6,359,076 $7,988,002 $5,951,845 $0 $20,298,922 $23,901,355
7/1/25 9/1/25 $6,641,596 $8,342,891 $6,216,272 $0 $21,200,759 $24,963,239
7/1/26 9/1/26 $6,936,757 $8,713,660 $6,492,531 $0 $22,142,949 $26,072,639
7/1/27 9/1/27 $7,245,129 $9,101,024 $6,781,155 $0 $23,127,309 $27,231,693
7/1/28 9/1/28 $7,567,307 $9,505,731 $7,082,701 $0 $24,155,739 $28,442,637
7/1/29 9/1/29 $7,903,912 $9,928,560 $7,397,750 $0 $25,230,222 $29,707,808
7/1/30 9/1/30 $8,255,594 $10,370,328 $7,726,911 $0 $26,352,834 $31,029,648
7/1/31 9/1/31 $0 $10,831,889 $8,070,819 $0 $18,902,708 $18,902,708
7/1/32 9/1/32 $0 $11,314,135 $8,430,140 $0 $19,744,274 $19,744,274
7/1/33 9/1/33 $0 $11,817,997 $8,805,566 $0 $20,623,563 $20,623,563
7/1/34 9/1/34 $0 $12,344,451 $9,197,826 $0 $21,542,277 $21,542,277
7/1/35 9/1/35 $0 $12,894,515 $9,607,678 $0 $22,502,192 $22,502,192
</TABLE>
<PAGE>
Tonnage Moved REACTED INFORMATION
Steel railcar Base Freight Rate REACTED INFORMATION
Steel railcar Incentive Freight Rate REACTED INFORMATION
Aluminum Freight Rate 8.5 MM tons 2000 REACTED INFORMATION
Aluminum Freight Rate 8.5 to 10.0 MM tons 2000 REACTED INFORMATION
Aluminum Freight Rate ABOVE 10.0 MM tons 2000 REACTED INFORMATION
Total Freight Bill REACTED INFORMATION
Total Base Case REACTED INFORMATION
<PAGE>
Schedule 8
Base Case minus Aluminum
ALUMINUM GONDOLA CASE CASH FLOW (1995-2035)
<TABLE>
<CAPTION>
Lease # 1 Lease # 2 Lease # 3 Lease # 4
Railcars are Railcars are Railcars are Railcars are Total
Lease returned returned returned third returned third Lease
Payment mid 1998 mid 1999 quarter 2000 quarter 2002 Payment
<S> <C> <C> <C> <C> <C> <C>
7/1/93 9/1/93 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/94 9/1/94 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/95 9/1/95 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/96 9/1/96 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/97 9/1/97 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/98 9/1/98 $1,866,418 $3,196,586 $2,570,738 $982,992 $8,616,734
7/1/99 9/1/99 0 $1,598,293 $2,570,738 $982,992 $5,152,023
7/1/00 9/1/00 $2,570,738 $982,992 $3,553,730
7/1/01 9/1/01 $0 $982,992 $982,992
7/1/02 9/1/02 $0 $982,992 $982,992
7/1/03 9/1/03
7/1/04 9/1/04
7/1/05 9/1/05
7/1/06 9/1/06
7/1/07 9/1/07
7/1/08 9/1/08
7/1/09 9/1/09
7/1/10 9/1/10
7/1/11 9/1/11
7/1/12 9/1/12
7/1/13 9/1/13
7/1/14 9/1/14
7/1/15 9/1/15
7/1/16 9/1/16
7/1/17 9/1/17
7/1/18 9/1/18
7/1/19 9/1/19
7/1/20 9/1/20
7/1/21 9/1/21
7/1/22 9/1/22
7/1/23 9/1/23
7/1/24 9/1/24
7/1/25 9/1/25
7/1/26 9/1/26
7/1/27 9/1/27
7/1/28 9/1/28
7/1/29 9/1/29
7/1/30 9/1/30
7/1/31 9/1/31
7/1/32 9/1/32
7/1/33 9/1/33
7/1/34 9/1/34
7/1/35 9/1/35
</TABLE>
<PAGE>
Additional equipment needs
Lease trains- Total
180@425, Parking cost of additional
114@299, steel gondolas equipment
and 250@475 ($1.25/day/gondola) needs
7/1/93 9/1/93 $0
7/1/94 9/1/94 $2,752,032 $2,752,032
7/1/95 9/1/95 $2,752,032 $631,678 $3,383,710
7/1/96 9/1/96 $409,032 $1,067,169 $1,476,201
7/1/97 9/1/97 $1,015,156 $1,015,156
7/1/98 9/1/98 $880,106 $880,106
7/1/99 9/1/99 $405,606 $405,606
7/1/00 9/1/00 $405,606 $405,606
7/1/01 9/1/01 $143,719 $143,719
7/1/02 9/1/02 $179,648 $179,648
7/1/03 9/1/03 $0
7/1/04 9/1/04 $0
7/1/05 9/1/05 $0
7/1/06 9/1/06 $0
7/1/07 9/1/07 $0
7/1/08 9/1/08 $0
7/1/09 9/1/09 $0
7/1/10 9/1/10 $0
7/1/11 9/1/11 $0
7/1/12 9/1/12 $0
7/1/13 9/1/13 $0
7/1/14 9/1/14 $0
7/1/15 9/1/15 $0
7/1/16 9/1/16 $0
7/1/17 9/1/17 $0
7/1/18 9/1/18 $0
7/1/19 9/1/19 $0
7/1/20 9/1/20 $0
7/1/21 9/1/21 $0
7/1/22 9/1/22 $0
7/1/23 9/1/23 $0
7/1/24 9/1/24 $0
7/1/25 9/1/25 $0
7/1/26 9/1/26 $0
7/1/27 9/1/27 $0
7/1/28 9/1/28 $0
7/1/29 9/1/29 $0
7/1/30 9/1/30 $0
7/1/31 9/1/31 $0
7/1/32 9/1/32 $0
7/1/33 9/1/33 $0
7/1/34 9/1/34 $0
7/1/35 9/1/35 $0
<PAGE>
Purchase new Aluminum railcars
Total lease Aluminum
cost for Railcars
Lot 1 of Lot 2 of Aluminum Net Lease
new railcars new railcars Railcars Payments
1,150 1,139 2,289
7/1/93 9/1/93 $0 $0 $0 $8,616,734
7/1/94 9/1/94 $0 $0 $11,368,766
7/1/95 9/1/95 $2,830,977 $2,870,434 $5,701,411 $17,701,855
7/1/96 9/1/96 $5,661,954 $5,740,869 $11,402,823 $21,495,757
7/1/97 9/1/97 $5,661,954 $5,740,869 $11,402,823 $21,034,713
7/1/98 9/1/98 $5,661,954 $5,740,869 $11,402,823 $20,899,663
7/1/99 9/1/99 $5,661,954 $5,740,869 $11,402,823 $16,960,452
7/1/00 9/1/00 $5,661,954 $5,740,869 $11,402,823 $15,362,159
7/1/01 9/1/01 $5,661,954 $5,740,869 $11,402,823 $12,529,533
7/1/02 9/1/02 $5,661,954 $5,740,869 $11,402,823 $12,565,463
7/1/03 9/1/03 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/04 9/1/04 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/05 9/1/05 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/06 9/1/06 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/07 9/1/07 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/08 9/1/08 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/09 9/1/09 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/10 9/1/10 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/11 9/1/11 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/12 9/1/12 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/13 9/1/13 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/14 9/1/14 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/15 9/1/15 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/16 9/1/16 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/17 9/1/17 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/18 9/1/18 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/19 9/1/19 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/20 9/1/20 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/21 9/1/21 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/22 9/1/22 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/23 9/1/23 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/24 9/1/24 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/25 9/1/25 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/26 9/1/26 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/27 9/1/27 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/28 9/1/28 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/29 9/1/29 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/30 9/1/30 $5,661,954 $5,740,869 $11,402,823 $11,402,823
7/1/31 9/1/31 $0 $5,740,869 $5,740,869 $5,740,869
7/1/32 9/1/32 $0 $5,740,869 $5,740,869 $5,740,869
7/1/33 9/1/33 $0 $5,740,869 $5,740,869 $5,740,869
7/1/34 9/1/34 $0 $5,740,869 $5,740,869 $5,740,869
7/1/35 9/1/35 $0 $5,740,869 $5,740,869 $5,740,869
<PAGE>
Maintenance Cost Estimation
Maintenance on Steel Railcars
Lot 1 Lot 2 Lot 3 Lot 4
592 744 574 315 2225
7/1/93 9/1/93 $1,329,739 $1,671,159 $1,289,308 $707,547 $4,997,754
7/1/94 9/1/94
7/1/95 9/1/95
7/1/96 9/1/96
7/1/97 9/1/97
7/1/98 9/1/98
7/1/99 9/1/99
7/1/00 9/1/00
7/1/01 9/1/01
7/1/02 9/1/02
7/1/03 9/1/03
7/1/04 9/1/04
7/1/05 9/1/05
7/1/06 9/1/06
7/1/07 9/1/07
7/1/08 9/1/08
7/1/09 9/1/09
7/1/10 9/1/10
7/1/11 9/1/11
7/1/12 9/1/12
7/1/13 9/1/13
7/1/14 9/1/14
7/1/15 9/1/15
7/1/16 9/1/16
7/1/17 9/1/17
7/1/18 9/1/18
7/1/19 9/1/19
7/1/20 9/1/20
7/1/21 9/1/21
7/1/22 9/1/22
7/1/23 9/1/23
7/1/24 9/1/24
7/1/25 9/1/25
7/1/26 9/1/26
7/1/27 9/1/27
7/1/28 9/1/28
7/1/29 9/1/29
7/1/30 9/1/30
7/1/31 9/1/31
7/1/32 9/1/32
7/1/33 9/1/33
7/1/34 9/1/34
7/1/35 9/1/35
<PAGE>
Maintenance on Higher Loaded Steel
Lot 1 Lot 2 Lot 3 Lot 4
592 744 574 315 2225
7/1/93 9/1/93 $0 $0 $0 $0 $0
7/1/94 9/1/94 $1,784,902 $2,243,187 $1,730,631 $949,737 $6,708,457
7/1/95 9/1/95 $925,037 $1,162,546 $896,911 $492,207 $3,476,701
7/1/96 9/1/96 $0 $0 $0 $0 $0
7/1/97 9/1/97 $0 $0 $0 $0 $0
7/1/98 9/1/98 $0 $0 $0 $0 $0
7/1/99 9/1/99 $0 $0 $0 $0 $0
7/1/00 9/1/00 $0 $0 $0 $0 $0
7/1/01 9/1/01 $0 $0 $0 $0 $0
7/1/02 9/1/02 $0 $0 $0 $0 $0
7/1/03 9/1/03 $0 $0 $0 $0 $0
7/1/04 9/1/04 $0 $0 $0 $0 $0
7/1/05 9/1/05 $0 $0 $0 $0 $0
7/1/06 9/1/06 $0 $0 $0 $0 $0
7/1/07 9/1/07 $0 $0 $0 $0 $0
7/1/08 9/1/08 $0 $0 $0 $0 $0
7/1/09 9/1/09 $0 $0 $0 $0 $0
7/1/10 9/1/10 $0 $0 $0 $0 $0
7/1/11 9/1/11 $0 $0 $0 $0 $0
7/1/12 9/1/12 $0 $0 $0 $0 $0
7/1/13 9/1/13 $0 $0 $0 $0 $0
7/1/14 9/1/14 $0 $0 $0 $0 $0
7/1/15 9/1/15 $0 $0 $0 $0 $0
7/1/16 9/1/16 $0 $0 $0 $0 $0
7/1/17 9/1/17 $0 $0 $0 $0 $0
7/1/18 9/1/18 $0 $0 $0 $0 $0
7/1/19 9/1/19 $0 $0 $0 $0 $0
7/1/20 9/1/20 $0 $0 $0 $0 $0
7/1/21 9/1/21 $0 $0 $0 $0 $0
7/1/22 9/1/22 $0 $0 $0 $0 $0
7/1/23 9/1/23 $0 $0 $0 $0 $0
7/1/24 9/1/24 $0 $0 $0 $0 $0
7/1/25 9/1/25 $0 $0 $0 $0 $0
7/1/26 9/1/26 $0 $0 $0 $0 $0
7/1/27 9/1/27 $0 $0 $0 $0 $0
7/1/28 9/1/28 $0 $0 $0 $0 $0
7/1/29 9/1/29 $0 $0 $0 $0 $0
7/1/30 9/1/30 $0 $0 $0 $0 $0
7/1/31 9/1/31 $0 $0 $0 $0 $0
7/1/32 9/1/32 $0 $0 $0 $0 $0
7/1/33 9/1/33 $0 $0 $0 $0 $0
7/1/34 9/1/34 $0 $0 $0 $0 $0
7/1/35 9/1/35 $0 $0 $0 $0 $0
<PAGE>
Maintenance on additional equipment
Aluminum
Herzog lease Other lease GE lease Railcars
180 114 250 0
7/1/93 9/1/93 $0
7/1/94 9/1/94 $189,000 $319,200 $525,000 $1,033,200
7/1/95 9/1/95 $94,500 $159,600 $262,500 $516,600
7/1/96 9/1/96 $0 $0 $0 $0 $0
7/1/97 9/1/97 0 0 0 0 $0
7/1/98 9/1/98 0 0 0 0 $0
7/1/99 9/1/99 0 0 0 0 $0
7/1/00 9/1/00 0 0 0 0 $0
7/1/01 9/1/01 0 0 0 0 $0
7/1/02 9/1/02 0 0 0 0 $0
7/1/03 9/1/03 0 0 0 0 $0
7/1/04 9/1/04 0 0 0 0 $0
7/1/05 9/1/05 0 0 0 0 $0
7/1/06 9/1/06 0 0 0 0 $0
7/1/07 9/1/07 0 0 0 0 $0
7/1/08 9/1/08 0 0 0 0 $0
7/1/09 9/1/09 0 0 0 0 $0
7/1/10 9/1/10 0 0 0 0 $0
7/1/11 9/1/11 0 0 0 0 $0
7/1/12 9/1/12 0 0 0 0 $0
7/1/13 9/1/13 0 0 0 0 $0
7/1/14 9/1/14 0 0 0 0 $0
7/1/15 9/1/15 0 0 0 0 $0
7/1/16 9/1/16 0 0 0 0 $0
7/1/17 9/1/17 0 0 0 0 $0
7/1/18 9/1/18 0 0 0 0 $0
7/1/19 9/1/19 0 0 0 0 $0
7/1/20 9/1/20 0 0 0 0 $0
7/1/21 9/1/21 0 0 0 0 $0
7/1/22 9/1/22 0 0 0 0 $0
7/1/23 9/1/23 0 0 0 0 $0
7/1/24 9/1/24 0 0 0 0 $0
7/1/25 9/1/25 0 0 0 0 $0
7/1/26 9/1/26 0 0 0 0 $0
7/1/27 9/1/27 0 0 0 0 $0
7/1/28 9/1/28 0 0 0 0 $0
7/1/29 9/1/29 0 0 0 0 $0
7/1/30 9/1/30 0 0 0 0 $0
7/1/31 9/1/31 0 0 0 0 $0
7/1/32 9/1/32 0 0 0 0 $0
7/1/33 9/1/33 0 0 0 0 $0
7/1/34 9/1/34 0 0 0 0 $0
7/1/35 9/1/35 0 0 0 0 $0
<PAGE>
Maintenance on Aluminum Railcars
Total Lease
Lot 1 of new Lot 2 of new cost for Aluminum Railcars
railcars railcars Aluminum Railcars Maintenance
1,150 1,139
7/1/93 9/1/93 $0 $0 $0 $4,997,754
7/1/94 9/1/94 $0 $0 $0 $7,741,657
7/1/95 9/1/95 $250,740 $248,341 $499,081 $4,492,382
7/1/96 9/1/96 $521,105 $516,120 $1,037,225 $1,037,225
7/1/97 9/1/97 $1,082,301 $1,071,948 $2,154,249 $2,154,249
7/1/98 9/1/98 $2,807,590 $2,780,735 $5,588,324 $5,588,324
7/1/99 9/1/99 $2,915,803 $2,887,913 $5,803,716 $5,803,716
7/1/00 9/1/00 $3,534,616 $3,500,807 $7,035,423 $7,035,423
7/1/01 9/1/01 $4,511,746 $4,468,590 $8,980,336 $8,980,336
7/1/02 9/1/02 $4,690,606 $4,645,740 $9,336,346 $9,336,346
7/1/03 9/1/03 $4,880,112 $4,833,433 $9,713,545 $9,713,545
7/1/04 9/1/04 $5,080,545 $5,031,949 $10,112,494 $10,112,494
7/1/05 9/1/05 $5,292,159 $5,241,538 $10,533,697 $10,533,697
7/1/06 9/1/06 $5,516,473 $5,463,706 $10,980,179 $10,980,179
7/1/07 9/1/07 $5,753,522 $5,698,488 $11,452,009 $11,452,009
7/1/08 9/1/08 $6,002,830 $5,945,411 $11,948,241 $11,948,241
7/1/09 9/1/09 $6,266,024 $6,206,088 $12,472,112 $12,472,112
7/1/10 9/1/10 $6,543,056 $6,480,470 $13,023,525 $13,023,525
7/1/11 9/1/11 $6,832,298 $6,766,945 $13,599,243 $13,599,243
7/1/12 9/1/12 $7,133,910 $7,065,672 $14,199,582 $14,199,582
7/1/13 9/1/13 $7,448,810 $7,377,561 $14,826,371 $14,826,371
7/1/14 9/1/14 $7,778,463 $7,704,061 $15,482,524 $15,482,524
7/1/15 9/1/15 $8,123,415 $8,045,713 $16,169,129 $16,169,129
7/1/16 9/1/16 $8,484,993 $8,403,832 $16,888,825 $16,888,825
7/1/17 9/1/17 $8,861,071 $8,776,313 $17,637,384 $17,637,384
7/1/18 9/1/18 $9,253,888 $9,165,373 $18,419,261 $18,419,261
7/1/19 9/1/19 $9,664,250 $9,571,809 $19,236,059 $19,236,059
7/1/20 9/1/20 $10,092,945 $9,996,404 $20,089,348 $20,089,348
7/1/21 9/1/21 $10,540,797 $10,439,972 $20,980,769 $20,980,769
7/1/22 9/1/22 $11,008,668 $10,903,367 $21,912,035 $21,912,035
7/1/23 9/1/23 $11,497,457 $11,387,482 $22,884,939 $22,884,939
7/1/24 9/1/24 $12,008,107 $11,893,247 $23,901,355 $23,901,355
7/1/25 9/1/25 $12,541,601 $12,421,638 $24,963,239 $24,963,239
7/1/26 9/1/26 $13,098,967 $12,973,672 $26,072,639 $26,072,639
7/1/27 9/1/27 $13,681,279 $13,550,414 $27,231,693 $27,231,693
7/1/28 9/1/28 $14,289,660 $14,152,977 $28,442,637 $28,442,637
7/1/29 9/1/29 $14,925,286 $14,782,522 $29,707,808 $29,707,808
7/1/30 9/1/30 $15,589,382 $15,440,266 $31,029,648 $31,029,648
7/1/31 9/1/31 $0 $16,127,479 $16,127,479 $16,127,479
7/1/32 9/1/32 $0 $16,845,489 $16,845,489 $16,845,489
7/1/33 9/1/33 $0 $17,595,684 $17,595,684 $17,595,684
7/1/34 9/1/34 $0 $18,379,516 $18,379,516 $18,379,516
7/1/35 9/1/35 $0 $19,198,500 $19,198,500 $19,198,500
<PAGE>
Tonnage Moved REACTED INFORMATION
Steel railcar Base Freight Rate REACTED INFORMATION
Steel railcar Incentive Freight Rate REACTED INFORMATION
Aluminum Freight Rate 8.5 mm TONS REACTED INFORMATION
Aluminum Freight Rate 8.5 TO 10.0 mm TONS REACTED INFORMATION
Aluminum Freight Rate above 10.0 mm TONS REACTED INFORMATION
Total Freight Bill REACTED INFORMATION
Total Aluminum Gondola Option Cash Flow REACTED INFORMATION
<PAGE>
<TABLE>
<CAPTION>
Schedule 9-A
High Capacity Rail Cars
Value to Customers under Current Regulation
Base on xxx million tons & Freight Incentive Rate of xxxx/Ton through 1999,
then xxx/ton thereafter (1995 dollars) assumes no no sublease income offset
Base Case (1995-2035) - Replace Existing Steel Rail Cars with Aluminum
After Steel Rail Car Leases Expire.
Coal Transportation Costs
Lease Payments Maintenance Freight Total
<S> <C> <C> <C> <C>
1995 $11,368,766 $7,986,602 REACTED INFORMATION REACTED INFORMATION
1996 $10,779,556 $7,622,882 REACTED INFORMATION REACTED INFORMATION
1997 $10,370,524 $7,665,811 REACTED INFORMATION REACTED INFORMATION
1998 $10,370,524 $8,122,790 REACTED INFORMATION REACTED INFORMATION
1999 $10,346,304 $6,963,710 REACTED INFORMATION REACTED INFORMATION
2000 $13,197,779 $4,788,244 REACTED INFORMATION REACTED INFORMATION
2001 $10,627,041 $3,423,072 REACTED INFORMATION REACTED INFORMATION
2002 $10,627,041 $5,295,769 REACTED INFORMATION REACTED INFORMATION
2003 $13,262,388 $5,700,701 REACTED INFORMATION REACTED INFORMATION
2004 $13,262,388 $6,423,371 REACTED INFORMATION REACTED INFORMATION
2005 $13,262,388 $7,987,681 REACTED INFORMATION REACTED INFORMATION
2006 $13,262,388 $10,057,815 REACTED INFORMATION REACTED INFORMATION
2007 $13,262,388 $10,589,854 REACTED INFORMATION REACTED INFORMATION
2008 $13,262,388 $11,394,694 REACTED INFORMATION REACTED INFORMATION
2009 $13,262,388 $12,472,112 REACTED INFORMATION REACTED INFORMATION
2010 $13,262,388 $13,023,525 REACTED INFORMATION REACTED INFORMATION
2011 $13,262,388 $13,599,243 REACTED INFORMATION REACTED INFORMATION
2012 $13,262,388 $14,199,582 REACTED INFORMATION REACTED INFORMATION
2013 $13,262,388 $14,826,371 REACTED INFORMATION REACTED INFORMATION
2014 $13,262,388 $15,482,524 REACTED INFORMATION REACTED INFORMATION
2015 $13,262,388 $16,169,129 REACTED INFORMATION REACTED INFORMATION
2016 $13,262,388 $16,888,825 REACTED INFORMATION REACTED INFORMATION
2017 $13,262,388 $17,637,384 REACTED INFORMATION REACTED INFORMATION
2018 $13,262,388 $18,419,261 REACTED INFORMATION REACTED INFORMATION
2019 $13,262,388 $19,236,059 REACTED INFORMATION REACTED INFORMATION
2020 $13,262,388 $20,089,348 REACTED INFORMATION REACTED INFORMATION
2021 $13,262,388 $20,980,769 REACTED INFORMATION REACTED INFORMATION
2022 $13,262,388 $21,912,035 REACTED INFORMATION REACTED INFORMATION
2023 $13,262,388 $22,884,939 REACTED INFORMATION REACTED INFORMATION
2024 $13,262,388 $23,901,355 REACTED INFORMATION REACTED INFORMATION
2025 $13,262,388 $24,963,239 REACTED INFORMATION REACTED INFORMATION
2026 $13,262,388 $26,072,639 REACTED INFORMATION REACTED INFORMATION
2027 $13,262,388 $27,231,693 REACTED INFORMATION REACTED INFORMATION
2028 $13,262,388 $28,442,637 REACTED INFORMATION REACTED INFORMATION
2029 $13,262,388 $29,707,808 REACTED INFORMATION REACTED INFORMATION
2030 $13,262,388 $31,029,648 REACTED INFORMATION REACTED INFORMATION
2031 $8,068,106 $18,902,708 REACTED INFORMATION REACTED INFORMATION
2032 $8,068,106 $19,744,274 REACTED INFORMATION REACTED INFORMATION
2033 $8,068,106 $20,623,563 REACTED INFORMATION REACTED INFORMATION
2034 $8,068,106 $21,542,277 REACTED INFORMATION REACTED INFORMATION
2035 $8,068,106 $22,502,192 REACTED INFORMATION REACTED INFORMATION
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aluminum Gondola Option assumes no sublease income - Replacement before Steel Gondola leases Expire
Coal Transportation Costs
<S> <C> <C> <C> <C> <C>
Lease Payments Maintenance Freight Total Cost Difference
1995 $17,701,855 $4,492,382 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1996 $21,495,757 $1,037,225 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1997 $21,034,713 $2,154,249 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1998 $20,899,663 $5,588,324 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1999 $16,960,452 $5,803,716 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2000 $15,362,159 $7,035,423 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2001 $12,529,533 $8,980,336 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2002 $12,565,463 $9,336,346 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2003 $11,402,823 $9,713,545 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2004 $11,402,823 $10,112,494 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2005 $11,402,823 $10,533,697 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2006 $11,402,823 $10,980,179 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2007 $11,402,823 $11,452,009 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2008 $11,402,823 $11,948,241 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2009 $11,402,823 $12,472,112 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2010 $11,402,823 $13,023,525 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2011 $11,402,823 $13,599,243 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2012 $11,402,823 $14,199,582 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2013 $11,402,823 $14,826,371 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2014 $11,402,823 $15,482,524 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2015 $11,402,823 $16,169,129 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2016 $11,402,823 $16,888,825 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2017 $11,402,823 $17,637,384 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2018 $11,402,823 $18,419,261 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2019 $11,402,823 $19,236,059 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2020 $11,402,823 $20,089,348 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2021 $11,402,823 $20,980,769 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2022 $11,402,823 $21,912,035 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2023 $11,402,823 $22,884,939 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2024 $11,402,823 $23,901,355 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2025 $11,402,823 $24,963,239 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2026 $11,402,823 $26,072,639 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2027 $11,402,823 $27,231,693 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2028 $11,402,823 $28,442,637 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2029 $11,402,823 $29,707,808 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2030 $11,402,823 $31,029,648 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2031 $5,740,869 $16,127,479 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2032 $5,740,869 $16,845,489 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2033 $5,740,869 $17,595,684 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2034 $5,740,869 $18,379,516 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2035 $5,740,869 $19,198,500 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
</TABLE>
Discount Rate 8.53%
Ten Year NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
Project Life NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
<PAGE>
<TABLE>
<CAPTION>
Schedule 9-B
Entergy Corporation
High Capacity Rail Cars
Value to Customers Under Current Regulation
Base on xxx million tons & Freight Incentive Rate of
xxxx/Ton through 1999,
then xxx/ton thereafter (1995 dollars) assumes no no
sublease income offset
Base Case (1995-2035) - Replace Existing Steel Rail Cars
with Aluminum After Steel Rail Car Leases Expire.
Coal Transportation Costs
<S> <C> <C> <C> <C>
Lease Payments Maintenance Freight Total
1995 $11,368,766 $7,986,602 REACTED INFORMATION REACTED INFORMATION
1996 $10,779,556 $7,622,882 REACTED INFORMATION REACTED INFORMATION
1997 $10,370,524 $7,665,811 REACTED INFORMATION REACTED INFORMATION
1998 $10,370,524 $8,122,790 REACTED INFORMATION REACTED INFORMATION
1999 $10,346,304 $6,963,710 REACTED INFORMATION REACTED INFORMATION
2000 $13,197,779 $4,788,244 REACTED INFORMATION REACTED INFORMATION
2001 $10,627,041 $3,423,072 REACTED INFORMATION REACTED INFORMATION
2002 $10,627,041 $5,295,769 REACTED INFORMATION REACTED INFORMATION
2003 $13,262,388 $5,700,701 REACTED INFORMATION REACTED INFORMATION
2004 $13,262,388 $6,423,371 REACTED INFORMATION REACTED INFORMATION
2005 $13,262,388 $7,987,681 REACTED INFORMATION REACTED INFORMATION
2006 $13,262,388 $10,057,815 REACTED INFORMATION REACTED INFORMATION
2007 $13,262,388 $10,589,854 REACTED INFORMATION REACTED INFORMATION
2008 $13,262,388 $11,394,694 REACTED INFORMATION REACTED INFORMATION
2009 $13,262,388 $12,472,112 REACTED INFORMATION REACTED INFORMATION
2010 $13,262,388 $13,023,525 REACTED INFORMATION REACTED INFORMATION
2011 $13,262,388 $13,599,243 REACTED INFORMATION REACTED INFORMATION
2012 $13,262,388 $14,199,582 REACTED INFORMATION REACTED INFORMATION
2013 $13,262,388 $14,826,371 REACTED INFORMATION REACTED INFORMATION
2014 $13,262,388 $15,482,524 REACTED INFORMATION REACTED INFORMATION
2015 $13,262,388 $16,169,129 REACTED INFORMATION REACTED INFORMATION
2016 $13,262,388 $16,888,825 REACTED INFORMATION REACTED INFORMATION
2017 $13,262,388 $17,637,384 REACTED INFORMATION REACTED INFORMATION
2018 $13,262,388 $18,419,261 REACTED INFORMATION REACTED INFORMATION
2019 $13,262,388 $19,236,059 REACTED INFORMATION REACTED INFORMATION
2020 $13,262,388 $20,089,348 REACTED INFORMATION REACTED INFORMATION
2021 $13,262,388 $20,980,769 REACTED INFORMATION REACTED INFORMATION
2022 $13,262,388 $21,912,035 REACTED INFORMATION REACTED INFORMATION
2023 $13,262,388 $22,884,939 REACTED INFORMATION REACTED INFORMATION
2024 $13,262,388 $23,901,355 REACTED INFORMATION REACTED INFORMATION
2025 $13,262,388 $24,963,239 REACTED INFORMATION REACTED INFORMATION
2026 $13,262,388 $26,072,639 REACTED INFORMATION REACTED INFORMATION
2027 $13,262,388 $27,231,693 REACTED INFORMATION REACTED INFORMATION
2028 $13,262,388 $28,442,637 REACTED INFORMATION REACTED INFORMATION
2029 $13,262,388 $29,707,808 REACTED INFORMATION REACTED INFORMATION
2030 $13,262,388 $31,029,648 REACTED INFORMATION REACTED INFORMATION
2031 $8,068,106 $18,902,708 REACTED INFORMATION REACTED INFORMATION
2032 $8,068,106 $19,744,274 REACTED INFORMATION REACTED INFORMATION
2033 $8,068,106 $20,623,563 REACTED INFORMATION REACTED INFORMATION
2034 $8,068,106 $21,542,277 REACTED INFORMATION REACTED INFORMATION
2035 $8,068,106 $22,502,192 REACTED INFORMATION REACTED INFORMATION
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aluminum Gondola Option assumes sublease income to offset 50% lease
payment - Replacement before Steel Gondola leases Expire
Coal Transportation Costs
<S> <C> <C> <C> <C> <C> <C>
Lease Payments Maintenance Freight Total Cost Difference NPV of Cost Difference
1995 $17,070,177 $4,492,382 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1996 $16,120,222 $1,037,225 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1997 $15,711,190 $2,154,249 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1998 $15,711,190 $5,588,324 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1999 $13,978,834 $5,803,716 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2000 $13,179,688 $7,035,423 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2001 $11,894,319 $8,980,336 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2002 $11,894,319 $9,336,346 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2003 $11,402,823 $9,713,545 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2004 $11,402,823 $10,112,494 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2005 $11,402,823 $10,533,697 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2006 $11,402,823 $10,980,179 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2007 $11,402,823 $11,452,009 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2008 $11,402,823 $11,948,241 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2009 $11,402,823 $12,472,112 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2010 $11,402,823 $13,023,525 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2011 $11,402,823 $13,599,243 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2012 $11,402,823 $14,199,582 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2013 $11,402,823 $14,826,371 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2014 $11,402,823 $15,482,524 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2015 $11,402,823 $16,169,129 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2016 $11,402,823 $16,888,825 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2017 $11,402,823 $17,637,384 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2018 $11,402,823 $18,419,261 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2019 $11,402,823 $19,236,059 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2020 $11,402,823 $20,089,348 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2021 $11,402,823 $20,980,769 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2022 $11,402,823 $21,912,035 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2023 $11,402,823 $22,884,939 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2024 $11,402,823 $23,901,355 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2025 $11,402,823 $24,963,239 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2026 $11,402,823 $26,072,639 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2027 $11,402,823 $27,231,693 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2028 $11,402,823 $28,442,637 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2029 $11,402,823 $29,707,808 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2030 $11,402,823 $31,029,648 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2031 $5,740,869 $16,127,479 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2032 $5,740,869 $16,845,489 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2033 $5,740,869 $17,595,684 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2034 $5,740,869 $18,379,516 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2035 $5,740,869 $19,198,500 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
</TABLE>
Discount Rate - 8.53%
<PAGE>
Ten Year NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
Project Life NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
<PAGE>
Schedule 9-C
Entergy Corporation
High Capacity Rail Cars
Value to Customers Under Current Regulation
Base on xxx million tons & Freight Incentive Rate of xxxx/Ton through 1999,
then xxx/ton thereafter (1995 dollars) assumes no no sublease income offset
Base Case (1995-2035) - Replace Existing Steel Rail Cars with Aluminum
After Steel Rail Car Leases Expire.
Coal Transportation Costs
Lease Payments Maintenance Freight Total
1995 $11,368,766 $7,986,602 REACTED INFORMATION REACTED INFORMATION
1996 $10,779,556 $7,622,882 REACTED INFORMATION REACTED INFORMATION
1997 $10,370,524 $7,665,811 REACTED INFORMATION REACTED INFORMATION
1998 $10,370,524 $8,122,790 REACTED INFORMATION REACTED INFORMATION
1999 $10,346,304 $6,963,710 REACTED INFORMATION REACTED INFORMATION
2000 $13,197,779 $4,788,244 REACTED INFORMATION REACTED INFORMATION
2001 $10,627,041 $3,423,072 REACTED INFORMATION REACTED INFORMATION
2002 $10,627,041 $5,295,769 REACTED INFORMATION REACTED INFORMATION
2003 $13,262,388 $5,700,701 REACTED INFORMATION REACTED INFORMATION
2004 $13,262,388 $6,423,371 REACTED INFORMATION REACTED INFORMATION
2005 $13,262,388 $7,987,681 REACTED INFORMATION REACTED INFORMATION
2006 $13,262,388 $10,057,815 REACTED INFORMATION REACTED INFORMATION
2007 $13,262,388 $10,589,854 REACTED INFORMATION REACTED INFORMATION
2008 $13,262,388 $11,394,694 REACTED INFORMATION REACTED INFORMATION
2009 $13,262,388 $12,472,112 REACTED INFORMATION REACTED INFORMATION
2010 $13,262,388 $13,023,525 REACTED INFORMATION REACTED INFORMATION
2011 $13,262,388 $13,599,243 REACTED INFORMATION REACTED INFORMATION
2012 $13,262,388 $14,199,582 REACTED INFORMATION REACTED INFORMATION
2013 $13,262,388 $14,826,371 REACTED INFORMATION REACTED INFORMATION
2014 $13,262,388 $15,482,524 REACTED INFORMATION REACTED INFORMATION
2015 $13,262,388 $16,169,129 REACTED INFORMATION REACTED INFORMATION
2016 $13,262,388 $16,888,825 REACTED INFORMATION REACTED INFORMATION
2017 $13,262,388 $17,637,384 REACTED INFORMATION REACTED INFORMATION
2018 $13,262,388 $18,419,261 REACTED INFORMATION REACTED INFORMATION
2019 $13,262,388 $19,236,059 REACTED INFORMATION REACTED INFORMATION
2020 $13,262,388 $20,089,348 REACTED INFORMATION REACTED INFORMATION
2021 $13,262,388 $20,980,769 REACTED INFORMATION REACTED INFORMATION
2022 $13,262,388 $21,912,035 REACTED INFORMATION REACTED INFORMATION
2023 $13,262,388 $22,884,939 REACTED INFORMATION REACTED INFORMATION
2024 $13,262,388 $23,901,355 REACTED INFORMATION REACTED INFORMATION
2025 $13,262,388 $24,963,239 REACTED INFORMATION REACTED INFORMATION
2026 $13,262,388 $26,072,639 REACTED INFORMATION REACTED INFORMATION
2027 $13,262,388 $27,231,693 REACTED INFORMATION REACTED INFORMATION
2028 $13,262,388 $28,442,637 REACTED INFORMATION REACTED INFORMATION
2029 $13,262,388 $29,707,808 REACTED INFORMATION REACTED INFORMATION
2030 $13,262,388 $31,029,648 REACTED INFORMATION REACTED INFORMATION
2031 $8,068,106 $18,902,708 REACTED INFORMATION REACTED INFORMATION
2032 $8,068,106 $19,744,274 REACTED INFORMATION REACTED INFORMATION
2033 $8,068,106 $20,623,563 REACTED INFORMATION REACTED INFORMATION
2034 $8,068,106 $21,542,277 REACTED INFORMATION REACTED INFORMATION
2035 $8,068,106 $22,502,192 REACTED INFORMATION REACTED INFORMATION
<PAGE>
<TABLE>
<CAPTION>
Aluminum Gondola Option assumes sublease income to
offset 100% lease payment -
Replacement before Steel Gondola leases Expire
Coal Transportation Costs
<S> <C> <C> <C> <C> <C> <C>
Lease Payments Maintenance FREIGHT Total Cost Difference NPV of Cost Difference
1995 $17,070,177 $4,492,382 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1996 $11,811,855 $1,037,225 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1997 $11,402,823 $2,154,249 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1998 $11,402,823 $5,588,324 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1999 $11,402,823 $5,803,716 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2000 $11,402,823 $7,035,423 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2001 $11,402,823 $8,980,336 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2002 $11,402,823 $9,336,346 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2003 $11,402,823 $9,713,545 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2004 $11,402,823 $10,112,494 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2005 $11,402,823 $10,533,697 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2006 $11,402,823 $10,980,179 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2007 $11,402,823 $11,452,009 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2008 $11,402,823 $11,948,241 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2009 $11,402,823 $12,472,112 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2010 $11,402,823 $13,023,525 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2011 $11,402,823 $13,599,243 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2012 $11,402,823 $14,199,582 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2013 $11,402,823 $14,826,371 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2014 $11,402,823 $15,482,524 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2015 $11,402,823 $16,169,129 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2016 $11,402,823 $16,888,825 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2017 $11,402,823 $17,637,384 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2018 $11,402,823 $18,419,261 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2019 $11,402,823 $19,236,059 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2020 $11,402,823 $20,089,348 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2021 $11,402,823 $20,980,769 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2022 $11,402,823 $21,912,035 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2023 $11,402,823 $22,884,939 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2024 $11,402,823 $23,901,355 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2025 $11,402,823 $24,963,239 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2026 $11,402,823 $26,072,639 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2027 $11,402,823 $27,231,693 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2028 $11,402,823 $28,442,637 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2029 $11,402,823 $29,707,808 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2030 $11,402,823 $31,029,648 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2031 $5,740,869 $16,127,479 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2032 $5,740,869 $16,845,489 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2033 $5,740,869 $17,595,684 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2034 $5,740,869 $18,379,516 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2035 $5,740,869 $19,198,500 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
</TABLE>
Discount Rate - 8.53%
<PAGE>
Ten Year NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
Project Life NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
<PAGE>
<TABLE>
<CAPTION>
Schedule 10
Entergy Corporation
High Capacity Rail Cars
Value to Customers Under Current Regulation
Base on xxx million tons & Freight Incentive Rate of xxx/Ton through 1999,
then xxx/ton thereafter (1995 dollars) assumes no no sublease income offset
Base Case (1995-2035) - Replace Existing Steel Rail Cars with Aluminum
After Steel Rail Car Leases Expire.
Coal Transportation Costs
<S> <C> <C> <C> <C>
Lease Payments Maintenance Freight Total
1995 $11,368,766 $7,986,602 REACTED INFORMATION REACTED INFORMATION
1996 $10,779,556 $7,622,882 REACTED INFORMATION REACTED INFORMATION
1997 $10,370,524 $7,665,811 REACTED INFORMATION REACTED INFORMATION
1998 $10,370,524 $8,122,790 REACTED INFORMATION REACTED INFORMATION
1999 $10,346,304 $6,963,710 REACTED INFORMATION REACTED INFORMATION
2000 $13,197,779 $4,788,244 REACTED INFORMATION REACTED INFORMATION
2001 $10,627,041 $3,423,072 REACTED INFORMATION REACTED INFORMATION
2002 $10,627,041 $5,295,769 REACTED INFORMATION REACTED INFORMATION
2003 $13,262,388 $5,700,701 REACTED INFORMATION REACTED INFORMATION
2004 $13,262,388 $6,423,371 REACTED INFORMATION REACTED INFORMATION
2005 $13,262,388 $7,987,681 REACTED INFORMATION REACTED INFORMATION
2006 $13,262,388 $10,057,815 REACTED INFORMATION REACTED INFORMATION
2007 $13,262,388 $10,589,854 REACTED INFORMATION REACTED INFORMATION
2008 $13,262,388 $11,394,694 REACTED INFORMATION REACTED INFORMATION
2009 $13,262,388 $12,472,112 REACTED INFORMATION REACTED INFORMATION
2010 $13,262,388 $13,023,525 REACTED INFORMATION REACTED INFORMATION
2011 $13,262,388 $13,599,243 REACTED INFORMATION REACTED INFORMATION
2012 $13,262,388 $14,199,582 REACTED INFORMATION REACTED INFORMATION
2013 $13,262,388 $14,826,371 REACTED INFORMATION REACTED INFORMATION
2014 $13,262,388 $15,482,524 REACTED INFORMATION REACTED INFORMATION
2015 $13,262,388 $16,169,129 REACTED INFORMATION REACTED INFORMATION
2016 $13,262,388 $16,888,825 REACTED INFORMATION REACTED INFORMATION
2017 $13,262,388 $17,637,384 REACTED INFORMATION REACTED INFORMATION
2018 $13,262,388 $18,419,261 REACTED INFORMATION REACTED INFORMATION
2019 $13,262,388 $19,236,059 REACTED INFORMATION REACTED INFORMATION
2020 $13,262,388 $20,089,348 REACTED INFORMATION REACTED INFORMATION
2021 $13,262,388 $20,980,769 REACTED INFORMATION REACTED INFORMATION
2022 $13,262,388 $21,912,035 REACTED INFORMATION REACTED INFORMATION
2023 $13,262,388 $22,884,939 REACTED INFORMATION REACTED INFORMATION
2024 $13,262,388 $23,901,355 REACTED INFORMATION REACTED INFORMATION
2025 $13,262,388 $24,963,239 REACTED INFORMATION REACTED INFORMATION
2026 $13,262,388 $26,072,639 REACTED INFORMATION REACTED INFORMATION
2027 $13,262,388 $27,231,693 REACTED INFORMATION REACTED INFORMATION
2028 $13,262,388 $28,442,637 REACTED INFORMATION REACTED INFORMATION
2029 $13,262,388 $29,707,808 REACTED INFORMATION REACTED INFORMATION
2030 $13,262,388 $31,029,648 REACTED INFORMATION REACTED INFORMATION
2031 $8,068,106 $18,902,708 REACTED INFORMATION REACTED INFORMATION
2032 $8,068,106 $19,744,274 REACTED INFORMATION REACTED INFORMATION
2033 $8,068,106 $20,623,563 REACTED INFORMATION REACTED INFORMATION
2034 $8,068,106 $21,542,277 REACTED INFORMATION REACTED INFORMATION
2035 $8,068,106 $22,502,192 REACTED INFORMATION REACTED INFORMATION
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aluminum Gondola Option assumes no sublease income
- Replacement before Steel Gondola leases Expire
Coal Transportation Costs
<S> <C> <C> <C> <C> <C> <C>
Lease
Payments Maintenance Freight Total Cost Difference NPV of Cost Difference
1995 $17,701,855 $4,492,382 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1996 $21,495,757 $1,037,225 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1997 $21,034,713 $2,154,249 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1998 $20,899,663 $5,588,324 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1999 $16,960,452 $5,803,716 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2000 $15,362,159 $7,035,423 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2001 $12,529,533 $8,980,336 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2002 $12,565,463 $9,336,346 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2003 $11,402,823 $9,713,545 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2004 $11,402,823 $10,112,494 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2005 $11,402,823 $10,533,697 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2006 $11,402,823 $10,980,179 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2007 $11,402,823 $11,452,009 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2008 $11,402,823 $11,948,241 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2009 $11,402,823 $12,472,112 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2010 $11,402,823 $13,023,525 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2011 $11,402,823 $13,599,243 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2012 $11,402,823 $14,199,582 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2013 $11,402,823 $14,826,371 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2014 $11,402,823 $15,482,524 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2015 $11,402,823 $16,169,129 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2016 $11,402,823 $16,888,825 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2017 $11,402,823 $17,637,384 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2018 $11,402,823 $18,419,261 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2019 $11,402,823 $19,236,059 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2020 $11,402,823 $20,089,348 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2021 $11,402,823 $20,980,769 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2022 $11,402,823 $21,912,035 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2023 $11,402,823 $22,884,939 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2024 $11,402,823 $23,901,355 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2025 $11,402,823 $24,963,239 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2026 $11,402,823 $26,072,639 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2027 $11,402,823 $27,231,693 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2028 $11,402,823 $28,442,637 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2029 $11,402,823 $29,707,808 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2030 $11,402,823 $31,029,648 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2031 $5,740,869 $16,127,479 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2032 $5,740,869 $16,845,489 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2033 $5,740,869 $17,595,684 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2034 $5,740,869 $18,379,516 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
2035 $5,740,869 $19,198,500 REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
</TABLE>
Discount Rate - 8.53%
<PAGE>
Ten Year NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
Project Life NPV
Coal Transportation Costs Base Case Aluminum Difference
Lease Payments
Maintenance REACTED INFORMATION
Freight
Total
<PAGE>
Tons consumed on behalf of
AP&L's Net Area Requirements
1995 $1,297,700
1996 $1,325,900
1997 $1,439,150
1998 $2,090,220
1999 $2,103,210
2000 $1,997,380
2001 $2,511,260
2002 $2,161,080
2003 $2,214,530
2004 $3,033,930
2005 $3,537,780
2006 $3,571,770
2007 $4,008,530
2008 $4,281,170
2009 $4,157,150
2010 $4,853,860
2011 $4,685,570
2012 $4,864,080
2013 $4,989,865
2014 $5,118,903
2015 $5,251,278
2016 $5,387,076
2017 $5,526,386
2018 $5,669,298
2019 $5,815,906
2020 $5,966,305
2021 $6,120,594
2022 $6,278,873
2023 $6,441,244
2024 $6,607,815
2025 $6,778,693
2026 $6,953,990
2027 $7,133,820
2028 $7,318,301
2029 $7,507,552
2030 $7,701,697
2031 $1,063,125
2032 $1,063,125
2033 $1,063,125
2034 $0
2035 $0
AP&L's Retail Customer Ratio - 88.59%
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Amount of
Tons consumed Percent of annual savings
on behalf of total coal attributed to NPV AP&L NPV AP&L
AP&L's retail for retail AP&L's retail customers customers
customers customers customers 1995-2005 1995-2033
1995 $1,149,632 8.52% REACTED INFORMATION REACTED INFORMATION REACTED INFORMATION
1996 $1,174,615 8.70% REACTED INFORMATION
1997 $1,274,943 9.44% REACTED INFORMATION
1998 $1,851,726 13.72% REACTED INFORMATION
1999 $1,863,234 13.80% REACTED INFORMATION
2000 $1,769,479 13.11% REACTED INFORMATION
2001 $2,224,725 16.48% REACTED INFORMATION
2002 $1,914,501 14.18% REACTED INFORMATION
2003 $1,961,852 14.53% REACTED INFORMATION
2004 $2,687,759 19.91% REACTED INFORMATION
2005 $3,134,119 23.22% REACTED INFORMATION
2006 $3,164,231 23.44% REACTED INFORMATION
2007 $3,551,157 26.30% REACTED INFORMATION
2008 $3,792,689 28.09% REACTED INFORMATION
2009 $3,682,819 27.28% REACTED INFORMATION
2010 $4,300,035 31.85% REACTED INFORMATION
2011 $4,150,946 30.75% REACTED INFORMATION
2012 $4,309,088 31.92% REACTED INFORMATION
2013 $4,420,521 32.74% REACTED INFORMATION
2014 $4,534,836 33.59% REACTED INFORMATION
2015 $4,652,107 34.46% REACTED INFORMATION
2016 $4,772,411 35.35% REACTED INFORMATION
2017 $4,895,825 36.27% REACTED INFORMATION
2018 $5,022,431 37.20% REACTED INFORMATION
2019 $5,152,311 38.17% REACTED INFORMATION
2020 $5,285,550 39.15% REACTED INFORMATION
2021 $5,422,234 40.16% REACTED INFORMATION
2022 $5,562,453 41.20% REACTED INFORMATION
2023 $5,706,298 42.27% REACTED INFORMATION
2024 $5,853,863 43.36% REACTED INFORMATION
2025 $6,005,244 44.48% REACTED INFORMATION
2026 $6,160,540 45.63% REACTED INFORMATION
2027 $6,319,851 46.81% REACTED INFORMATION
2028 $6,483,283 48.02% REACTED INFORMATION
2029 $6,650,940 49.27% REACTED INFORMATION
2030 $6,822,934 50.54% REACTED INFORMATION
2031 $941,822 15.75% REACTED INFORMATION
2032 $941,822 15.75% REACTED INFORMATION
2033 $941,822 15.75% REACTED INFORMATION
2034 $0 0.00% REACTED INFORMATION
2035 $0 0.00% REACTED INFORMATION
</TABLE>
<PAGE>
Substituted tabular data for graghic Schedule 11
Sinsitivity Analysis For Aluminum Gondola Study
Description Low Nominal High
Of Uncertainty
1995 Rates ($87,691,435) $0 $220,809,978
Rates after leases ($55,929,977) $0 $40,827,800
Tons shipped ($38,247,007) $0 $15,298,803
1995 lease rates ($28,509,247) $0 $20,833,681
Lease rates later ($17,186,413) $0 $19,641,615
Steel leases offset $0 $0 $30,382,964
Steel maint. ($4,033,420) $0 $3,649,285
Aluminum maint. ($3,175,159) $0 $3,509,386
Al. gon price ($1,921,995) $0 $2,882,992
<PAGE>
Exhibit D-4
BEFORE THE
ARKANSAS PUBLIC SERVICE COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ARKANSAS )
POWER & LIGHT COMPANY FOR ) DOCKET NO. 94-_____-U
APPROVAL OF ACCOUNTING )
PROCEDURES FOR COAL COSTS )
DIRECT TESTIMONY
OF
J. DAVID WRIGHT
MANAGER, REGULATORY ACCOUNTING
ENTERGY SERVICES, INC.
ON BEHALF OF
ARKANSAS POWER & LIGHT COMPANY
DECEMBER 13, 1994
<PAGE>
Q. PLEASE STATE YOUR NAME, EMPLOYER, BUSINESS ADDRESS
AND JOB TITLE.
A. My name is J. David Wright. I am employed by
Entergy Services, Inc. as Manager, Regulatory
Accounting. My business address is 2500 TCBY
Building, 425 West Capitol, Little Rock, Arkansas
72203.
Q. PLEASE DESCRIBE YOUR EDUCATIONAL AND PROFESSIONAL
BACKGROUND.
A. I am a certified public accountant. I received a
Bachelor of Business Administration degree with a
major in accounting from the University of Central
Arkansas in 1976. After graduation, I worked in
public accounting until May of 1980 when I was
employed by Arkansas Power & Light Company ("AP&L"
or the "Company") in the Taxes and Special Studies
Section as an accountant. I was promoted to Manager
of Regulatory Accounting and Tax for AP&L in
November 1986 and served in that position until I
assumed my current position on January 1, 1993.
Q. ON WHOSE BEHALF ARE YOU SUBMITTING THIS TESTIMONY?
A. I am submitting this testimony on behalf of AP&L.
Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS
PROCEEDING?
A. The purpose of my testimony is to support AP&L's
Application requesting Arkansas Public Service
Commission ("APSC" or the "Commission") approval to
implement a plan to reduce coal costs to AP&L's
customers through acquisition by lease of a fleet of
aluminum railcars and negotiation of a coal
transportation rate less than that currently
realized by the Company. Specifically, my testimony
will describe the proposed accounting treatment for
the transactions involved.
Q. PLEASE DESCRIBE AP&L'S CURRENT ACCOUNTING FOR COAL
COSTS.
A. AP&L accounts for its coal costs by charging cost as
paid or accrued to Account 151 - Fuel Stock or
Account 152 - Fuel Stock Expenses Undistributed, and
as the coal is burned the appropriate amount of
costs are transferred from the coal inventory
accounts to the fuel expense accounts, Account 501 -
Fuel. These accounts are subdivided by coal plant -
- White Bluff Steam Electric Station or Independence
Steam Electric Station -- and by the different
classes of fuel stock costs -- for example, Coal
Cost-Invoice, Freight, Rail Car Leases.
Q. CAN YOU BE MORE SPECIFIC AS TO HOW AP&L ACCOUNTS FOR
ITS SEMIANNUAL RAIL CAR LEASE PAYMENTS.
A. Monthly one-sixth of the semi-annual rental payment
for each lease is allocated proportionately to the
appropriate Account 151 plant sub account on the
basis of how the railcar fleet was utilized for each
plant. The Coal Supply Department provides a ratio
of the number of trains shipped to and unloaded at
each plant. This ratio is then applied to the total
monthly lease payment accrual to allocate a
proportionate share of the payment to each coal
plant's fuel stock account for rail car lease cost.
Q. WHAT IS THE COMPANY'S PROPOSED TREATMENT FOR COSTS
ASSOCIATED WITH THE LEASE OF THE ALUMINUM COAL CARS?
A. The Company's treatment of cost associated with the
lease of the aluminum coal cars would be the same as
the Company's treatment of cost associated with its
steel coal cars.
Q. WILL THIS AFFECT THE CURRENT ACCOUNTING TREATMENT OF
THE EXISTING LEASE FOR THE STEEL COAL CARS?
A. This would not materially affect the accounting
treatment of the existing lease for the steel coal
cars. The Company would set up additional sub
accounts to account separately for the steel and
aluminum rail car lease costs and would use the
ratio provided by Fuel Supply for the new aluminum
railcars also to allocate the steel rail car lease
costs to the appropriate sub-accounts. Any and all
revenues received as a result of subleasing, sales
or exchanges of the steel rail cars would be used to
reduce lease costs associated with the steel railcar
lease prior to allocation to the sub-accounts.
These revenues would be shown in Account 151 - Fuel
Stock.
Q. PLEASE STATE YOUR OPINION AS TO WHETHER THE PROPOSED
TRANSACTION ACCOUNTING TREATMENT COMPLIES WITH THE
UNIFORM SYSTEM OF ACCOUNTS.
A. In my opinion, it does. However, because of the
unusual nature and the dollar magnitude of the
transaction, the Company believed that confirmation
of that opinion by the Commission would be prudent.
Q. MR. WRIGHT, DOES THIS CONCLUDE YOUR TESTIMONY?
A. Yes, it does.
<PAGE>
Exhibit D-5
Arkansas Public Service Commission
IN THE MATTER OF THE )
APPLICATION OF ARKANSAS )
POWER & LIGHT COMPANY FOR ) DOCKET NO. 94-439-U
APPROVAL OF ACCOUNTING ) ORDER NO. 2
PROCEDURES FOR COAL COSTS )
ORDER
On December 13, 1994, Arkansas Power & Light Company
("AP&L") filed an Application requesting Commission approval
of AP&L's proposed accounting treatment of the costs
associated with the planned lease by AP&L of certain
aluminum gondola railcars to replace the existing fleet of
leased steel gondolas. The railcars are used to transport
coal from Wyoming for use as fuel in AP&L's White Bluff
Steam Electric Station and the Independence Steam Electric
Station.
Transportation of the coal from mines in Wyoming to the
generating stations in Arkansas currently in provided
pursuant to contractual arrangements with Union Pacific
System and Western Railroad Properties, Inc. (the
"Railroads"). As a result of negotiations with the
Railroads, AP&L has the opportunity to enter into an amended
rail transportation agreement that provides significant
reductions in coal transportation rates. The amendment,
however, is dependent upon AP&L obtaining aluminum railcars,
which are significantly lighter that the existing steel
railcars and can carry more coal per railcar.
The proposed lease of aluminum gondolas and the
resulting decrease in transportation rates negotiated with
the Railroads is projected to save $95.1 million on a net
present value basis for the period 1995 through 2035, the
year in which the last coal fueled electric generation unit
retires. The portion of these savings attributable to AP&L
retail customers is estimated to be $22.0 million.
The projected savings represent the net of costs
associated with the existing lease of steel railcars at the
existing contractual transportation rate as compared to the
proposed lease of aluminum railcars at the new
transportation rate negotiated with the Railroads. These
savings assume that all the costs of the existing steel
railcar leases will continue to be treated as fuel expense
for the life of these leases. These savings could be
enhanced by a sub-lease of the existing steel railcars to
others or net benefit of lease termination after sale of the
steel railcars to others by the lessor. AP&L believes that
the costs associated with the aluminum railcar lease, the
existing steel railcar leases and any offset thereto due to
disposition of the existing steel railcars, are properly
accounted for in the Uniform System of Accounts as fuel
expenses in Account 501-Fuel for all purposes under AP&L's
Fuel Adjustment Clause Rate Rider Schedule M27 ("Rate Rider
M27"). AP&L seeks a ruling from the Commission confirming
its interpretation before it enters into the aluminum
railcar lease and related obligations or, in the
alternative, a waiver of, and permission to deviate from,
such accounting requirements.
Direct Testimony was filed on December 13, 1995, by Mr.
Roy Giangrosso, Mr. J. David Wright and Mr. Jeffrey Herndon
on behalf of AP&L. Ms. Marie James filed prepared testimony
on behalf of the General Staff of the Arkansas Public
Service Commission ("Staff") on February 1, 1995.
Based upon the filed testimony, the Commission finds
that AP&L's proposed railcar lease transaction and the
proposed accounting treatment o fthe costs associated with
the transaction are in the public interest. Accordingly,
the Commission orders as follows:
(1) AP&L's December 13, 1994, Application is hereby
approved.
(2) The costs associated with the aluminum railcars
should be recorded in the applicable Fuel Inventory Account
Nos. 151 or 152 and transferred to Account No. 501-Fuel
Expense as the coal is used for generating electricity, and
should be recovered on a current basis through Rate Rider
M27.
(3) The costs associated with the "idled" steel
railcars should be accounted for separately and recorded in
the applicable Fuel Inventory Account Nos. 151 or 152 and
transferred to Account No. 501-Fuel Expense as the coal is
used for generating electricity, and should be recovered on
a current basis through Rate Rider M27 as well.
(4) AP&L shall filed an annual report in Docket No. 86-
033-A, referencing Docket No. 94-439-U, which includes all
the relevant information with regard to the railcar lease
costs, all revenues realized from any disposition of the
steel railcars, and the net savings realized from the
conversion to the aluminum railcar fleet to enable Staff to
monitor the benefits accruing to the ratepayers from the
project.
(5) The proposed transaction shall otherwise be
accomplished in accordance with the procedures and
recommendations contained in the above-described testimony.
BY ORDER OF THE COMMISSION.
This 22nd day of February, 1995.
/s/ Sam I Bratton, Jr.
Sam I Bratton, Jr., Chairman
/s/ Patricia S. Qualls
Patricia S. Qualls,
Commissioner
/s/ Julius D. Kearney
Julius D. Kearney,
Commissioner
/s/ Glenna Hooks (acting)
Jan Sanders
Secretary of the Commission
EXHIBIT H
[Suggested Form of Notice of Proposed Transactions]
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- ; 70- )
Arkansas Power & Light Company, et al.
Notice of Proposal For Arkansas Power & Light Company to Sublease
Existing Steel Railcars As Well As New Aluminum Railcars Which It
Is Proposing To Acquire
Arkansas Power & Light Company ("AP&L"), 425 West
Capitol Avenue, Little Rock, Arkansas 72201, Louisiana Power &
Light Company, 639 Loyola Avenue, New Orleans, Louisiana 70113,
Mississippi Power & Light Company, 308 East Pearl Street,
Jackson, Mississippi 39201, New Orleans Public Service Inc., 639
Loyola Avenue, New Orleans, Louisiana 70113 and System Fuels,
Inc., 639 Loyola Avenue, New Orleans, Louisiana 70113,
subsidiaries of Entergy Corporation, a registered holding
company, have filed a Post-Effective Amendment to their joint
Application-Declaration in File No. 70-8001 with this Commission
under Sections 9(a) and 10 of the Public Utility Holding Company
Act of 1935 ("Act").
AP&L is proposing to replace its existing steel railcar
fleet with aluminum railcars. The steel railcars are currently
being used by AP&L to transport coal from Wyoming to the two-unit
White Bluff Steam Electric Station located near Redfield,
Arkansas ("White Bluff") and the two-unit Independence Steam
Electric Station located near Newark, Arkansas ("ISES"). By
replacing the steel railcars with aluminum railcars, AP&L and its
wholesale formula rate and retail customers, as well as the other
co-owners of the stations, will realize substantial reductions in
fuel costs. AP&L has indicated that the cost savings would be
significantly greater if AP&L were permitted to (a) sublease its
existing steel railcars for up to the remainder of their respective
lease terms, and (b) sublease the new aluminum railcars during periods
when they are not needed to service the coal transportation
requirements of White Bluff and ISES. AP&L is seeking authority
to enter into such subleasing transactions.
Transportation of coal from Wyoming to White Bluff and
ISES is provided by Union Pacific Railroad and Western Railroad
Properties, Inc. (the "Railroads"). Pursuant to a rail
transportation agreement with the Railroads, AP&L provides the
Railroads with the railcars needed to transport the coal and pays
the Railroads freight charges for the coal which is transported.
As a result of recent negotiations, the Railroads have agreed to
significantly reduce their freight charges provided that AP&L
replace its existing fleet of steel railcars with aluminum
railcars.
The use of aluminum railcars has become standard in the
industry. By using aluminum railcars, the number of trips needed
to deliver the same quantity of coal can be reduced because an
aluminum railcar can carry approximately 120 tons of coal while
the maximum load for a steel railcar is 106 tons. By reducing
the number of train trips, the Railroads are able to
significantly reduce their variable costs by making extra crew
shifts and power available for new business. A portion of these
savings would be passed on to AP&L through reduced freight rates.
In order to evaluate the economic attractiveness of
replacing the steel railcars with aluminum railcars, AP&L
developed a Base Case and an Aluminum Case. The Base Case
represents the costs associated with the continued use of the
existing steel railcars until the expiration of their respective
lease terms. The Aluminum Case represents the costs associated
with the full replacement in 1995 of the steel railcar fleet with
aluminum railcars. As the aluminum railcars are delivered, the
Aluminum Case assumes that the existing steel railcars are either
parked, subleased or sold.
If AP&L were to park the entire steel railcar fleet and
continue to make rental payments in connection therewith, the
cost savings associated with the full replacement of steel
railcars with aluminum railcars in 1995 are projected to be, on a
net present value basis, $44.0 million for the initial ten years
of the project (1995-2004), and $95.1 million for the period 1995
through 2035, the year in which the last coal unit is expected to
be retired. The portion of these savings attributable to AP&L
retail customers is estimated to be $5 million for the initial
ten years of the project and a total of $22.0 million over the
project life.
These cost savings would be significantly greater if
AP&L were able to offset a portion of the parking charges and
rental costs by subleasing the railcars for the remainder of
their lease terms or terminating the railcar leases and realizing
any benefits from the sale of the railcars by the lessors. Due
to the current strength of the steel railcar leasing market, AP&L
believes that subleasing of the steel railcars would result in
greater revenues and therefore increased cost savings than would
termination of the leases. Moreover, termination of the leases
could trigger significant payment obligations to the lessors in
1995 if the proceeds received from the sale of the steel railcars
were less than the termination values provided for in the leases.
If, on the other hand, AP&L were to sublease the steel railcars,
any sublease revenue received by AP&L would directly offset
AP&L's total lease obligations.
AP&L believes that subleasing of the steel railcars
would provide a stream of income which would significantly offset
the ongoing lease costs. If AP&L received sufficient sublease
income to offset 50 percent of the steel railcar lease payments,
the net present value of project savings would increase to $61.0
million in the first ten years and $112.1 million for the total
project life, measured in 1995 dollars for all ownership
interests. If sublease income is sufficient to offset 100
percent of the steel railcar lease payments, the net present
value savings increase to $74.5 million in the first ten years
and $125.6 million for the project life for all ownership
interests.
Because the existing steel railcars will become
economically obsolete upon acquisition of the new aluminum
railcars, and in view of the significant fuel cost reductions
that would result from subleasing, AP&L is requesting authority
to sublease all of its existing steel railcars for up to the
remainder of their respective lease terms so long as the
following conditions are met:
A. Each subleasing transaction shall be reported by a
quarterly Rule 24 Certificate.
B. Any revenue realized from the sublease of the
railcars shall be credited against AP&L's costs as
lessee of the railcars. The benefit from such lower
cost of leasing the railcars shall accrue to the owners
of White Bluff and ISES on a pass-through basis. Such
revenues shall be reflected accordingly in AP&L's
ratemaking provisions, except to the extent the
regulatory authority having jurisdiction over the
matters authorizes a different treatment. Such
revenues will be credited to "Fuel stock"
(Account No. 151 under FERC's Uniform System of
Accounts). In the event AP&L changes its method of
accounting for subleasing it will provide 30 days
advance notice of the proposed change to the SEC.
In order to satisfy the combined annual coal
requirements for White Bluff and ISES, AP&L will need to place in
service 2,289 aluminum railcars. The size of the aluminum
railcar fleet has been determined based upon the specific
delivery requirements of White Bluff and ISES.
During peak hauling periods the entire aluminum railcar
fleet will be fully utilized. However, there may be times when
fewer than 2,289 railcars will be required to service White Bluff
and ISES. During these periods, subleasing of the aluminum
railcars would provide a stream of income which would offset
AP&L's rental payment obligations under the proposed aluminum
railcar leases. Any reduction in AP&L's rental obligations would
benefit AP&L and its ratepayers through reduced fuel expenses.
In view of the foregoing, AP&L is requesting authority
to sublease its aluminum railcars to third parties subject to the
following restrictions:
A. No sublease will be longer than the period during
which the railcars are not needed for the
transportation of coal to White Bluff and ISES.
B. Each subleasing transaction shall be reported by a
quarterly Rule 24 Certificate.
C. Any revenue realized from the sublease of the
railcars shall be credited against AP&L's costs as
lessee of the railcars. The benefit from such lower
cost of leasing the railcars shall accrue to the owners
of White Bluff and ISES on a pass-through basis. Such
revenues shall be reflected accordingly in AP&L's
ratemaking provisions, except to the extent the
regulatory authority having jurisdiction over the
matters authorizes a different treatment. Such
revenues will be credited to "Fuel stock"
(Account No. 151 under FERC's Uniform System of
Accounts). In the event AP&L changes its method of
accounting for subleasing it will provide 30 days
advance notice of the proposed change to the SEC.
The Post-Effective Amendment to the Application-
Declaration and any further amendments thereto are available for
public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a
hearing should submit their views in writing by ,
1995, to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the applicants and
declarants at the address specified above. Proof of service (by
affidavit or, in case of an attorney at law, by certificate)
should be filed with the request. Any request for a hearing
shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any
hearing, if ordered, and will receive a copy of any notice or
order issued in this matter. After said date, the Application-
Declaration as so amended, may be granted and/or permitted to
become effective.
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
____________________
Secretary
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> DEC-31-1994 DEC-31-1994
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 2,870,345 2,870,345
<OTHER-PROPERTY-AND-INVEST> 142,979 142,979
<TOTAL-CURRENT-ASSETS> 518,445 518,445
<TOTAL-DEFERRED-CHARGES> 760,446 760,446
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 4,292,215 4,292,215
<COMMON> 470 470
<CAPITAL-SURPLUS-PAID-IN> 590,844 590,844
<RETAINED-EARNINGS> 491,799 491,799
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,083,113 1,083,113
58,527 58,527
176,350 176,350
<LONG-TERM-DEBT-NET> 1,293,879 1,293,879
<SHORT-TERM-NOTES> 34,667 34,667
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 28,175 28,175
0 0
<CAPITAL-LEASE-OBLIGATIONS> 150,688 150,688
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,466,816 1,466,816
<TOT-CAPITALIZATION-AND-LIAB> 4,292,215 4,292,215
<GROSS-OPERATING-REVENUE> 1,590,742 1,586,434
<INCOME-TAX-EXPENSE> 9,938 9,938
<OTHER-OPERATING-EXPENSES> 1,364,171 1,359,863
<TOTAL-OPERATING-EXPENSES> 1,374,109 1,369,801
<OPERATING-INCOME-LOSS> 216,633 216,633
<OTHER-INCOME-NET> 32,768 32,768
<INCOME-BEFORE-INTEREST-EXPEN> 249,401 249,401
<TOTAL-INTEREST-EXPENSE> 107,138 107,138
<NET-INCOME> 142,263 142,263
19,275 19,275
<EARNINGS-AVAILABLE-FOR-COMM> 122,988 122,988
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> DEC-31-1994 DEC-31-1994
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 15,917,018 15,917,018
<OTHER-PROPERTY-AND-INVEST> 448,140 448,140
<TOTAL-CURRENT-ASSETS> 2,212,432 2,212,432
<TOTAL-DEFERRED-CHARGES> 4,035,901 4,035,901
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 22,613,491 22,613,491
<COMMON> 2,300 2,300
<CAPITAL-SURPLUS-PAID-IN> 4,202,134 4,202,134
<RETAINED-EARNINGS> 2,223,739 2,223,739
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,350,795 6,350,795
299,946 299,946
550,955 550,955
<LONG-TERM-DEBT-NET> 7,093,473 7,093,473
<SHORT-TERM-NOTES> 171,867 171,867
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 151,904 151,904
0 0
<CAPITAL-LEASE-OBLIGATIONS> 425,851 425,851
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 7,568,088 7,568,088
<TOT-CAPITALIZATION-AND-LIAB> 22,613,491 22,613,491
<GROSS-OPERATING-REVENUE> 5,963,290 5,958,982
<INCOME-TAX-EXPENSE> 131,965 131,965
<OTHER-OPERATING-EXPENSES> 4,762,584 4,758,276
<TOTAL-OPERATING-EXPENSES> 4,894,549 4,890,241
<OPERATING-INCOME-LOSS> 1,068,741 1,068,741
<OTHER-INCOME-NET> 32,775 32,775
<INCOME-BEFORE-INTEREST-EXPEN> 1,101,516 1,101,516
<TOTAL-INTEREST-EXPENSE> 759,675 759,675
<NET-INCOME> 341,841 341,841
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 341,841 341,841
<COMMON-STOCK-DIVIDENDS> 411,806 411,806
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
FINANCIAL STATEMENTS
_________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
ARKANSAS POWER & LIGHT COMPANY
___________________________________________
AS OF DECEMBER 31, 1994
(Unaudited)
_____________________________________________
Pages 1 through 5
<PAGE>
ARKANSAS POWER & LIGHT COMPANY
JOURNAL ENTRIES
(in Thousands)
Entry to give effect to the sub leasing of 50% of the rail car
fleet resulting in a reduction to fuel revenues.
Entry No. 1
Revenue................................ $4,308,000
Operation & maintenance.................... $4,308,000
To record the sub lease of 50% of the current rail car fleet.
NOTE: The above transaction is for the sub leasing of the current
steel rail car fleet and does not reflect the leasing of
replacement rail cars.
<PAGE>
<TABLE>
<CAPTION>
ARKANSAS POWER & LIGHT COMPANY
PRO FORMA BALANCE SHEET
December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
ASSETS Transaction Filing Transaction
(In thousands)
<S> <C> <C> <C>
Utility Plant:
Electric $4,293,097 $4,293,097
Property under capital leases 56,135 56,135
Construction work in progress 136,701 136,701
Nuclear fuel under capital lease 94,628 94,628
---------- -- ----------
Total 4,580,561 0 4,580,561
Less - accumulated depreciation and amortization 1,710,216 1,710,216
---------- -- ----------
Utility plant - net 2,870,345 0 2,870,345
---------- -- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 11,215 11,215
Decommissioning trust fund 127,136 127,136
Other - at cost (less accumulated depreciation) 4,628 4,628
---------- -- ----------
Total 142,979 0 142,979
---------- -- ----------
Current Assets:
Cash and cash equivalents:
Cash 3,737 3,737
Temporary cash investments - at cost,
which approximates market:
Associated companies 4,713 4,713
Other 72,306 72,306
---------- -- ----------
Total cash and cash equivalents 80,756 0 80,756
Accounts receivable:
Customer (less allowance for doubtful accounts
of $2.0 million in 1994 and $2.1 million in 1993) 53,781 53,781
Associated companies 28,506 28,506
Other 11,181 11,181
Accrued unbilled revenues 83,863 83,863
Fuel inventory - at average cost 34,561 34,561
Materials and supplies - at average cost 79,886 79,886
Rate deferrals 113,630 113,630
Deferred excess capacity 8,414 8,414
Prepayments and other 23,867 23,867
---------- -- ----------
Total 518,445 0 518,445
---------- -- ----------
Deferred Debits and Other Assets:
Regulatory Assets:
Rate deferrals 360,496 360,496
Deferred excess capacity 20,060 20,060
SFAS 109 regulatory asset - net 227,068 227,068
Unamortized loss on reacquired debt 57,344 57,344
Other regulatory assets 68,813 68,813
Other 26,665 26,665
---------- -- ----------
Total 760,446 0 760,446
---------- -- ----------
TOTAL $4,292,215 $0 $4,292,215
========== == ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARKANSAS POWER & LIGHT COMPANY
PRO FORMA BALANCE SHEET
December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
CAPITALIZATION AND LIABILITIES Transactions Filing Transactions
(In thousands)
<S> <C> <C> <C>
Capitalization:
Common stock, $0.01 par value, authorized
325,000,000 shares; issued and outstanding
46,980,196 shares in 1994 and 1993 $470 $470
Paid-in capital 590,844 590,844
Retained earnings 491,799 491,799
---------- -- ----------
Total common shareholder's equity 1,083,113 0 1,083,113
Preferred stock:
Without sinking fund 176,350 176,350
With sinking fund 58,527 58,527
Long-term debt 1,293,879 1,293,879
---------- -- ----------
Total 2,611,869 0 2,611,869
---------- -- ----------
Other Noncurrent Liabilities:
Obligations under capital leases 94,534 94,534
Other 68,235 68,235
---------- -- ----------
Total 162,769 0 162,769
---------- -- ----------
Current Liabilities:
Currently maturing long-term debt 28,175 28,175
Notes payable:
Associated companies - -
Other 34,667 34,667
Accounts payable:
Associated companies 17,345 17,345
Other 89,329 89,329
Customer deposits 17,113 17,113
Taxes accrued 45,239 45,239
Accumulated deferred income taxes 25,043 25,043
Interest accrued 31,064 31,064
Dividends declared 4,727 4,727
Co-owner advances 20,639 20,639
Deferred fuel cost 20,254 20,254
Nuclear refueling reserve 37,954 37,954
Obligations under capital leases 56,154 56,154
Other 45,632 45,632
---------- -- ----------
Total 473,335 0 473,335
---------- -- ----------
Deferred Credits:
Accumulated deferred income taxes 859,558 859,558
Accumulated deferred investment tax credits 118,548 118,548
Other 66,136 66,136
---------- -- ----------
Total 1,044,242 0 1,044,242
---------- -- ----------
Commitments and Contingencies
TOTAL $4,292,215 $0 $4,292,215
========== == ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARKANSAS POWER & LIGHT COMPANY
PRO FORMA STATEMENT OF INCOME
For the Twelve Months Ended
December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
Transactions Filing Transactions
(In thousands)
<S> <C> <C> <C>
Operating Revenues $1,590,742 ($4,308) $1,586,434
---------- ------- ----------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 261,932 261,932
Purchased power 328,379 328,379
Nuclear refueling outage expenses 33,107 33,107
Other operation and maintenance 390,472 (4,308) 386,164
Depreciation and decommissioning 149,878 149,878
Taxes other than income taxes 33,610 33,610
Income taxes 9,938 9,938
Amortization of rate deferrals 166,793 166,793
---------- ------- ----------
Total 1,374,109 (4,308) 1,369,801
---------- ------- ----------
Operating Income 216,633 0 216,633
---------- ------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 4,001 4,001
Miscellaneous - net 48,049 48,049
Income taxes (19,282) (19,282)
---------- ------- ----------
Total 32,768 0 32,768
---------- ------- ----------
Interest Charges:
Interest on long-term debt 106,001 106,001
Other interest - net 4,811 4,811
Allowance for borrowed funds used
during construction (3,674) (3,674)
---------- ------- ----------
Total 107,138 0 107,138
---------- ------- ----------
Net Income 142,263 0 142,263
---------- ------- ----------
Preferred Stock Dividend Requirements
and Other 19,275 0 19,275
---------- ------- ----------
Earnings Applicable to Common Stock $122,988 $0 $122,988
========== ======= ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARKANSAS POWER & LIGHT COMPANY
PRO FORMA STATEMENT OF RETAINED EARNINGS
For the Twelve Months Ended
December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
Transactions Filing Transactions
(In thousands)
<S> <C> <C> <C>
Retained Earnings, January 1 $448,811 $448,811
Add:
Net income 142,263 142,263
-------- -- --------
Total 591,074 0 591,074
-------- -- --------
Deduct:
Dividends declared:
Preferred stock 19,275 19,275
Common stock 80,000 80,000
-------- -- --------
Total 99,275 0 99,275
-------- -- --------
Retained Earnings, December 31 $491,799 $0 $491,799
======== == ========
See Notes to Financial Statements.
</TABLE>
FINANCIAL STATEMENTS
_________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
ENTERGY CORPORATION
AND SUBSIDIARIES CONSOLIDATED
___________________________________________
AS OF DECEMBER 31, 1994
(Unaudited)
_____________________________________________
Pages 1 through 4
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEETS
December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
ASSETS Transaction Filing Transaction
(In thousands)
<S> <C> <C> <C>
Utility Plant:
Electric $21,184,013 $21,184,013
Plant acquisition adjustment - GSU 487,955 487,955
Electric plant under leases 668,846 668,846
Property under capital leases - electric 161,950 161,950
Natural gas 164,013 164,013
Steam products 77,307 77,307
Construction work in progress 476,816 476,816
Nuclear fuel under capital leases 265,520 265,520
Nuclear fuel 70,147 70,147
----------- -- -----------
Total 23,556,567 0 23,556,567
Less - accumulated depreciation and amortization 7,639,549 7,639,549
----------- -- -----------
Utility plant - net 15,917,018 0 15,917,018
----------- -- -----------
Other Property and Investments:
Decommissioning trust funds 207,395 207,395
Other 240,745 240,745
----------- -- -----------
Total 448,140 0 448,140
----------- -- -----------
Current Assets:
Cash and cash equivalents:
Cash 87,700 87,700
Temporary cash investments - at cost,
which approximates market 526,207 526,207
----------- -- -----------
Total cash and cash equivalents 613,907 0 613,907
Special deposits 8,074 8,074
Notes receivable 19,190 19,190
Accounts receivable: 0
Customer (less allowance for doubtful accounts of
$6.7 million in 1994 and $8.8 million in 1993) 325,410 325,410
Other 66,651 66,651
Accrued unbilled revenues 240,610 240,610
Fuel inventory 93,211 93,211
Materials and supplies - at average cost 365,956 365,956
Rate deferrals 380,612 380,612
Prepayments and other 98,811 98,811
----------- -- -----------
Total 2,212,432 0 2,212,432
----------- -- -----------
Deferred Debits and Other Assets:
Regulatory Assets:
Rate deferrals 1,451,926 1,451,926
SFAS 109 regulatory asset - net 1,417,646 1,417,646
Unamortized loss on reacquired debt 232,420 232,420
Other regulatory assets 316,878 316,878
Long-term receivables 277,830 277,830
Other 339,201 339,201
----------- -- -----------
Total 4,035,901 0 4,035,901
----------- -- -----------
TOTAL $22,613,491 $0 $22,613,491
=========== == ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEETS
December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
CAPITALIZATION AND LIABILITIES Transactions Filing Transactions
(In thousands)
<S> <C> <C> <C>
Capitalization:
Common stock, $0.01 par value, authorized 500,000,000
shares; issued 230,017,485 shares in 1994 and
231,219,737 shares in 1993 $2,300 $2,300
Paid-in capital 4,202,134 4,202,134
Retained earnings 2,223,739 2,223,739
Less - treasury stock (2,608,908 shares in 1994) 77,378 77,378
----------- -- -----------
Total common shareholders' equity 6,350,795 0 6,350,795
Subsidiaries' preference stock 150,000 150,000
Subsidiaries' preferred stock:
Without sinking fund 550,955 550,955
With sinking fund 299,946 299,946
Long-term debt 7,093,473 7,093,473
----------- -- -----------
Total 14,445,169 0 14,445,169
----------- -- -----------
Other Noncurrent Liabilities:
Obligations under capital leases 273,947 273,947
Other 310,977 310,977
----------- -- -----------
Total 584,924 0 584,924
----------- -- -----------
Current Liabilities:
Currently maturing long-term debt 349,085 349,085
Notes payable 171,867 171,867
Accounts payable 471,120 471,120
Customer deposits 134,478 134,478
Taxes accrued 92,578 92,578
Accumulated deferred income taxes 40,313 40,313
Interest accrued 195,639 195,639
Dividends declared 13,599 13,599
Deferred revenue - gas supplier judgment proceeds - -
Deferred fuel cost 27,066 27,066
Obligations under capital leases 151,904 151,904
Reserve for rate fefund 56,972 56,972
Other 327,330 327,330
----------- -- -----------
Total 2,031,951 0 2,031,951
----------- -- -----------
Deferred Credits:
Accumulated deferred income taxes 3,915,138 3,915,138
Accumulated deferred investment tax credits 649,898 649,898
Other 986,411 986,411
----------- -- -----------
Total 5,551,447 0 5,551,447
----------- -- -----------
Commitments and Contingencies
TOTAL $22,613,491 $0 $22,613,491
=========== == ===========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
For the Twelve Months Ended December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
Transactions Filing Transactions
(In thousands)
<S> <C> <C> <C>
Operating Revenues:
Electric $5,797,769 $(4,308) $5,793,461
Natural gas 118,962 118,962
Steam products 46,559 46,559
---------- ------- ----------
Total 5,963,290 (4,308) 5,958,982
---------- ------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 1,446,397 1,446,397
Purchased power 350,903 350,903
Nuclear refueling outage expenses 63,979 63,979
Other operation and maintenance 1,568,810 (4,308) 1,564,502
Depreciation and decommissioning 656,896 656,896
Taxes other than income taxes 284,234 284,234
Income taxes 131,965 131,965
Rate deferrals:
Rate deferrals - -
Amortization of rate deferrals 391,365 391,365
---------- ------- ----------
Total 4,894,549 (4,308) 4,890,241
---------- ------- ----------
Operating Income 1,068,741 0 1,068,741
---------- ------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 11,903 11,903
Miscellaneous - net 20,631 20,631
Income taxes 241 241
---------- ------- ----------
Total 32,775 0 32,775
---------- ------- ----------
Interest Charges:
Interest on long-term debt 665,541 665,541
Other interest - net 22,354 22,354
Allowance for borrowed funds used
during construction (9,938) (9,938)
Preferred dividend requirements of
subsidiaries and other 81,718 81,718
---------- ------- ----------
Total 759,675 0 759,675
---------- ------- ----------
Net Income $341,841 $0 $341,841
========== ======= ==========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
PRO FORMA STATEMENTS OF CONSOLIDATED RETAINED EARNINGS AND PAID-IN CAPITAL
For the Twelve Months Ended December 31, 1994
(Unaudited)
Adjustments to Reflect
Transactions Proposed
Before In Present After
Transactions Filing Transactions
(In thousands)
<S> <C> <C> <C>
Retained Earnings, January 1 $2,310,082 $2,310,082
Add:
Net income 341,841 341,841
---------- ----------
Total 2,651,923 0 2,651,923
---------- ----------
Deduct:
Dividends declared on common stock 411,806 411,806
Common stock retirements 13,940 13,940
Capital stock and other expenses 2,438 2,438
---------- ----------
Total 428,184 0 428,184
---------- ----------
Retained Earnings, December 31 $2,223,739 $2,223,739
========== ==========
Paid-in Capital, January 1 $4,223,682 $4,223,682
Add:
Loss on reacquisition of
subsidiaries' preferred stock (23) (23)
Issuance of 56,695,724 shares of common
stock in the merger with GSU - -
Issuance of 174,552,011 shares of common
stock at $.01 par value net of the
retirement of 174,552,011 shares of
common stock at $5.00 par value - -
---------- ----------
Total 4,223,659 4,223,659
---------- ----------
Deduct:
Common stock retirements 22,468 22,468
Capital stock discounts and other expenses (943) (943)
---------- ----------
Total 21,525 21,525
---------- ----------
Paid-in Capital, December 31 $4,202,134 $4,202,134
========== ==========
See Notes to Consolidated Financial Statements
</TABLE>
